In these still early and unprecedent days, forecasting the near-term social and economic impact of the pandemic feels like a tall order; attempting to look out one year or beyond feels like a Magic 8-Ball consultation: Will we have more answers than questions in 2021? “Cannot predict now.” Will economic growth rebound in 2021? “Ask again later.” Will the price of goods and services be higher or lower in 2021? “Yes – definitely.”
Alexandra Gorewicz's blog
This is the first global consumer shock (especially for U.S. and Chinese consumers) since the Great Financial Recession (GFR) of 2008-2009, so the fear gripping capital markets is completely justified because the consumer has propped up the post-GFR global economic recovery. In addition, post-GFR, business investment has been quite weak (outside of the energy sector and maybe big data investments) with a lot of debt issuance used to buy back stock, a non-productive use of capital.
“Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies.” So why do central banks keep reaching for the elusive 2% inflation target?
“Be careful what you wish for, you may receive it.” Over the last several months, it feels as if all central bankers have used every speaking opportunity to mention that their monetary policies, including bond purchases (quantitative easing or QE) and negative interest rates (NIRP), have reached their limits. This is an extremely important development, because it means that today’s monetary policies are no longer as effective as they once were.
To me, thinking of inverted yield curves is a bit like thinking of The Twilight Zone: a bizarre show with thought-provoking (and sometimes horrifying) episodes that generally convey some kind of moral dilemma.
Why do expected returns for risk-free assets (government bonds) appear, once again, to be compelling and competitive versus riskier assets? Join Alexandra Gorewicz, Associate Portfolio Manager, as she outlines the two major themes within the rates sector currently.
“Some use statistics as drunkards use lamp-posts – for support rather than illumination.” As 2017 comes to an end, it is only appropriate that we reflect on positioning and performance across our fixed income strategies and set the course for what is shaping up to be a challenging 2018.
“The truth will set you free, but first it will make you miserable.”
Bonds make the world go round
Managing global fixed income in a negative-yielding world