October 17, 2014

Avoid the market's black diamonds

Weaker retail sales and manufacturing data have raised concerns about the cycle.
Geopolitical sources of uncertainty suggest it might be time to take a step back.
Based on the fundamentals, I believe the US economy will ultimately prevail.


I’ve been talking about a backdrop of improving fundamentals, particularly for the US business cycle. We’ve seen unemployment claims falling and new job growth across a broad range of sectors, capital expenditures and the US export share rising, tax collections going up and the federal deficit shrinking, while consumer behavior has held steady.

This week we received new pieces of information that cast a cloud upon that relatively sunny outlook.
 

October 9, 2014

Where do we go from here?

From an economic growth perspective, the US has fared better than anywhere else.
We see compelling value among the higher-quality issues in the high-yield market.
In our view, there are structural forces that justify a bias toward US equities.


During our recent Market Outlook Webcast, MFS High Yield Portfolio Manager David Cole joined me to discuss the environment of persistently low yields and heightened geopolitical volatility, along with the potential headwinds and tailwinds on the horizon. Here are some of the key points.
 

September 26, 2014

Calling the fundamentals behind the markets

News and emotion can drive the markets in the short term.
Over time the market gyrations tend to sort themselves out.
What interests me is the fundamental picture for the business cycle.


My seatmate on a recent flight asked about my job. When I told her, she sympathized, saying that it must be hard to call the markets. After thinking about that phrase, I replied that I don’t think my job is to call the markets, but rather to call the fundamentals behind the markets.

If financial markets express what businesses are worth at any one time, then calling the markets is the pursuit of someone who thinks and acts in the near term. In the role of chief investment strategist, I see myself as another type of investment professional — one who tries to work in the long term.
 

September 16, 2014

As the taper ends

If the Fed’s QE taper ends in October, as expected, what will the impact be?
Demand/supply dynamics have helped to keep bond prices high and yields low.
Interest rate tightening is typically positive for stocks, at least in the initial phase.


If the taper of quantitative easing (QE) continues at its current pace, the US Federal Reserve’s purchases of mortgage-backed and Treasury securities will end in October. What then?

Many market watchers have said that the Fed’s heavy hand has manipulated interest rates lower, but I think this is only part of the story. The rest of the story suggests to me that rates will not lurch upward and bond prices will not collapse when QE ends.
 

September 11, 2014

Two things we learned last summer



According to Chief Investment Strategist James Swanson, the summer of 2014 was notable for the persistence of US corporate profitability and the divergence of the US economy from the rest of the world.

For more market commentary from MFS, visit our YouTube channel.

If you have trouble viewing this video on YouTube, please click here.

 

August 27, 2014

What are credit markets telling us?



James Swanson, Chief Investment Strategist, describes how the credit markets have been early indicators of equity market excesses, but are providing little evidence of a bubble now.

For more market commentary from MFS, visit our YouTube channel.

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August 19, 2014

A curious investing conundrum



US growth is accelerating and profits are rising, says James Swanson, Chief Investment Strategist, while China and Japan are slowing, and Europe’s recovery is faltering.

For more market commentary from MFS, visit our YouTube channel.

If you have trouble viewing this video on YouTube, please click here.