IMF Meetings: China and Ukraine Concern Emerging Market Investors

IMF Meetings: China and Ukraine Concern Emerging Market Investors

Three recurring themes pertaining to emerging markets became apparent during the recent spring International Monetary Fund (IMF) meetings in Washington, D.C.

1.      Most emerging markets investors expressed ongoing concerns about China. Both China’s economic slowdown and shadow banking system were cited as the biggest risk factors. The IMF mission chief for China and his staff were able to calm these concerns with their presentation, which focused on three key issues — growth, currency and reforms.

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Prepare for Divergent Markets

Prepare for Divergent Markets

The world’s major central banks are heading down different paths. As a result, I expect regional returns to vary widely, posing challenges for asset allocations and raising the potential for investors to make a costly mistake. I still believe developed markets are more attractive than emerging markets, with an emphasis on the US and Japan over Europe — though there are attractive opportunities within each region.

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Rising Food Prices May Whet Investors’ Appetite for Agriculture

Rising Food Prices May Whet Investors’ Appetite for Agriculture

Food prices are affected by a wide range of factors — from weather to geopolitics. Today, these factors seem to be pointing toward rising food inflation, and investors want to know where potential opportunities may lie.

Global food inflation, as measured by the FAO Food Price Index, hit a 10-month high in March, rising 2.3% month over month, according to the Food and Agriculture Organization of the United Nations.  The rise was attributed to unfavorable weather in the US and Brazil, as well as geopolitical tensions between Russia and Ukraine, which is a grain exporter.

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Why Today’s Environment Favors Active High Yield Strategies

Why Today’s Environment Favors Active High Yield Strategies

Fixed income investors are looking for ways to prepare their portfolios for rising interest rates. While bond prices generally fall when rates rise, history shows that high yield bonds have typically held up well in rising rate environments.

Since 1987, there have been 16 quarters in which 5-year Treasury yields rose by at least 70 basis points. During 10 of those quarters, high yield bonds delivered positive returns. During the other six quarters (in bold below), high yield bond returns were negative — but, they rebounded into positive territory the following quarter.

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European Rally Has Legs

European Rally Has Legs

Since hitting a low on June 1, 2012, the MSCI Europe Index has rallied 64.73%.1 In our view, there’s room for European equity markets to advance further, supported by strong fundamentals, positive flows and a steady uptrend from the June 2012 low.

European economic momentum outpaces US

The US economy has shown loss of momentum in early 2014. As the graph below shows, the U.S. Citi Economic Surprise Index, which measures the actual outcome of economic data releases relative to consensus estimates — has tumbled from a peak of 65.5 in early January to a low of -13.4 in the week ending March 4, 2014. In contrast, the Eurozone (EZ) Citi Economic Surprise Index turned positive in 2014 and has been trending positively higher since the spring of 2013.

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Income Is Always a Good Idea

Income Is Always a Good Idea

Mid-March 2014, and many market forecasts are already looking suspect. Most of the 2014 forecasts were positive on stocks, albeit at a lower return after such a strong year in 2013, and negative on bonds. However, January was a down month for stocks and a very strong month for bonds, February saw stocks rebound and bonds range-bound, and March thus far has stocks down more than up and bonds still range-bound. With apologies for altering the famous quote attributed to Audrey Hepburn in Sabrina, “Paris is always a good idea,” I would say that “income is always a good idea,” and diversifying an income stream is also a good idea. Income can come from a variety of sources. Below, I discuss a few that might be timely for 2014 and beyond.

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