We are on record advising clients to underweight US equities, as they are overvalued both in absolute terms and particularly relative to non-US markets. That said, we believe strongly in the value of constantly looking for where we could be wrong; thus, we have lately been exploring analyses that make the case for a bullish…
The lack of corporate debt liquidity is certainly worrisome—indeed, it is one of a myriad of similar potential trouble spots—and has some idiosyncratic elements investors should take into account. Observers have been warning of a potential crisis in corporate debt since the 2010 passage of the Dodd–Frank Wall Street Reform and Consumer Protection Act, which…
Over periods of prolonged prosperity, the economy transits from financial relations that make for a stable system to financial relations that make for an unstable system. —Hyman Minsky, “The Financial Instability Hypothesis,” May 1992 Stability Is Destabilizing —Minsky T-shirt Over the past several years, one of the most interesting market developments has been the virtual…
In this edition of C|A Answers, two members of our research team debate the potential for persistent deflation in the United States. Sean McLaughlin: No. The recent dip into deflation for the “headline” US Consumer Price Index (CPI) is likely to be short-lived and does not significantly increase the likelihood of persistent deflation. Headline inflation…
We maintain our neutral positioning for municipal bonds Though yields have moved below the 2% level that we previously viewed as a threshold for underweighting munis, other factors have changed the equation. Treasury yields have plunged as well, and ten-year Treasuries currently yield less than ten-year munis. Muni issuance remains quiescent, with new issuance at…
The European Central Bank’s (ECB’s) recently announced QE package—wherein the bank will buy €60 billion of public and private securities a month through at least September 2016—was widely anticipated, and as such much of the impact on markets had transpired long before Thursday. While the announcement does represent a watershed moment given the ECB is…
Despite the ongoing efforts of central banks to debase their currencies through increasing their monetary bases and some outright calls for devaluations, consumer prices remain weak across much of the developed world, and many market observers have begun to focus on the too-real possibility of the global economy falling into a deflation “trap.” Deflation now…
Investors today should consider holding cash—or preferably, increase sovereign bond allocations—given the extraordinary number and scope of current unknowns Current valuations, the role of central banks, a murky outlook for many global economies, and increasing geopolitical flashpoints add to uncertainty in the current environment. Holding some cash as dry powder to buy assets when they…
In our research publications we aim to provide you with insights from a variety of different viewpoints while maintaining an official Cambridge view on asset allocation and portfolio construction in our quarterly VantagePoint publication, written by our Chief Investment Strategist. In this edition of C|A Answers, two members of our Capital Markets Research team debate…
Valuations are high, volatility near all-time lows, and policy rates on the rise; investors, meanwhile, are the most optimistic since 1987. On top of all that, the geopolitical picture is arguably more unsettled than at any point since the late 1970s. So who in their right mind would buy equities? With the standard caveat that…