Risk aversion returned to the capital markets last month, as investors struggled to understand the fate of European monetary union. The fear was most evident in the exodus of Euro-denominated assets out of European banks and into the U.S. dollar. Spanish banks bore the brunt of the capital outflow, with an estimated 100 billion Euros […]
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As we conclude another robust earnings season, media attention has fixated on select weaker economic data, while ignoring economic strength. In the previous two years, global economic activity has slowed as spring arrived in the northern hemisphere. Anticipating a third consecutive year of second quarter weakness, investors over the last six weeks have reacted by […]
Looking past the noise of day-to-day market volatility, the investment climate has improved markedly since the end of 2011. The feared collapse of the global banking system has faded with European Central Bank’s Long Term bank funding operation and, while Greece was unable to avoid default, the write-down of Greek debt occurred without the messy […]
Despite the price weakness observed during the month, we continue to believe that U.S. Treasury interest rates remain artificially low and that corporate and municipal debt offers an attractive investment opportunity. To detail that thesis, we’ve prepared the following valuation discussion. In its simplest form, valuation is the expected purchasing power (also known as the […]
The storm clouds of worry that hung over the capital markets at year-end yielded to cautious optimism in January. Evidence of the improved sentiment could be found across nearly all asset classes. The S&P 500 index rallied more than 4% and the SPX volatility index (VIX) closed the month below 20% for the first time […]
As we commence the New Year, our thesis has not changed from that which we held 12 months ago; namely, U.S. interest rates are artificially low and the U.S. economy is performing better than general consensus believes. To fully clarify where we find ourselves at this stage of the economic cycle, we’ll first examine the […]
Prior to the open of trading on the last day of the month, the Federal Reserve took action to extend swap lines and lower the interest rate on loans to the European Central Bank. The market interpreted the action as being positive for the stock market and negative for the bond market. Unfortunately, the positive […]
Investors continued to grapple with exogenous events as volatility in the capital markets remained elevated throughout October. For much of the month, greed ruled as investors moved to buy equities amid a growing perception that the European Union had reached consensus to support the fiscally challenged members of the common currency. Indeed, approval of fiscal […]
Financial anxiety remained elevated during September as evident in the hyper-volatility of the stock market, acute widening in credit spreads, sharp rally in the U.S. Dollar, and the continued flight to U.S. Government debt. Our opinion is that with stability returning to the stock market and bank rumors subsiding, the price of corporate bonds will […]