Our Blog

Last week (May 13 – 17), markets digested reports on gross domestic product (GDP) growth in the Eurozone during the first quarter of 2013 (please see “The Big Picture” for details about the Eurozone’s structure). Overall real GDP in the Eurozone contracted by 0.2% in the first quarter of 2013, following the 0.6% drop in the fourth quarter of 2012. The Eurozone’s economic contraction in the first quarter of 2013 was its sixth consecutive quarter of decline, dating back to the fourth quarter of 2011. Among the larger economies in Europe, only…

To see the rest of the article, please click on the link below:

What’s Broken in Europe?

We devote this commentary each week to assessing the many reasons markets may rise or fall. But at the heart of it, all markets come down to just one thing: buyers and sellers. Taking a look at who is buying and who is selling can tell us something about the durability of the market’s performance and what may lie ahead…

To see the rest of the article, please click on the link below:

Buyers & Sellers

The April Index of Leading Economic Indicators (LEI), due out on Friday, May 17, 2013, caps off a busy week for economic reports in the United States. This week includes reports on…

To see the rest of the article, please click on the link below:

Listening to the Leaders

Will stocks have a pullback? Eventually sure — but when? This past Friday, May 10, 2013 marked 176 days since a 5%+ pullback in the S&P 500, tying the record for stretches without a pullback in this 50-month-old bull market…

To see the rest of the article, please click on the link below:

The Rally Is Getting Old, but a New Trend May Be Emerging

In this week’s commentary we attempt to clear up some of the confusion around some of the most common questions we encounter regularly, including:

1. The Federal Reserve (Fed), its balance sheet, its role in the economy, and its impact on inflation;
2. The federal budget deficit;
3. The federal debt outstanding, and the debt-to-GDP ratio; and
4. The trade deficit and a related topic, the US dollar.

In many ways, the items above are related. But oftentimes, pundits, politicians, newsletter writers, bloggers, Tweeters, and even the “traditional media” will confuse or conflate one or more of these issues, and that’s…

To see the rest of the article, please click on the link below:

Clearing Up Confusion on Common Queries

A recently detected error in a study by Harvard economists Reinhart & Rogoff has garnered much attention in the financial press lately. The study had initially concluded that once a country exceeded a 90% debt-to-gross domestic product (GDP) ratio, the pace of economic growth slowed sharply. The corrected data reveal that growth slows as debt-to-GDP rises, but at a pace not meaningfully different than at other round numbers. The study raised the issue of whether large amounts of debt are really bad. After waging a war on debt for the past several years…

To see the rest of the article, please click on the link below:

Borrowing for the Future

There are certain things we have gotten used to counting on each spring: the season changes and the weather warms, baseball games bring fans to the stadiums, the economy weakens, and investors “sell in May and go away.” The old Wall Street adage “sell in May and go away” refers to the seasonal tendency of stocks’ performance to weaken in the spring until the fall. In recent years, this spring slide in the stock market was driven by the arrival of a spring soft spot in the economy. This soft spot has emerged again — for the fourth year in a row…

To see the rest of the article, please click on the link below:

Soft Spot Arrives on Schedule

The first quarter of 2013 presented a mixed bag for income-seeking investors but did little to ease the difficult task of income-generation in today’s low-yield environment. High-quality bond prices declined over the first quarter, but weakness was modest and yields increased only slightly, limiting opportunity for income-seeking investors. Lower-rated bonds, such as high-yield bonds, bank loans, and preferred securities, witnessed price gains over the first quarter. Higher prices boosted total returns, but the lower yields on these higher yielding segments more than offset the modest increase in high-quality bond yields, making the job of income-seeking investors more difficult…

To see the rest of the article, please click on the link below:

Search for Income

Last week, U.S. stocks suffered their worst drop since June 1, 2012, measured by a 2.1% loss — totaling 318 points — in the Dow Jones Industrial Average. The week began with a terrorist attack that disrupted the Boston Marathon and a report that China’s economic growth unexpectedly slowed in the first quarter of 2013. Throughout the week, first quarter 2013 earnings results, including widely watched companies such as…

To see the rest of the article, please click on the link below:

Is Investor Complacency Finally Ending?

It seems there is no shortage of investors willing to forecast the impending doom for the bond market stemming from a reversal of the long decline in interest rates. Last week, the commissioner of the Securities and Exchange Commission (SEC) Daniel Gallagher stated that “financial armageddon” awaits municipal bond investors due to rising interest rates. Commissioner Gallagher tried to retract comments late in the week, saying he was merely trying to make bond investors aware of potential risks, but nonetheless joined a long list of doomsdayers who have used…

To see the rest of the article, please click on the link below:

Assessing Interest Rate Risk