Trump’s Tax Proposal: The Opening Move in a Poker Game

Posted by Brian Horrigan, Chief Economist on Apr 28, 2017 11:15:00 AM

Corporate tax highlights:

  • Cut the corporate income tax rate from its current 35% to 15%.
  • Apply the revised 15% corporate tax rate to "pass-through" entities, which include most partnerships and limited liability companies (small businesses).
  • Levy a one-time tax on the approximate $2.6 trillion in earnings that US corporations hold offshore—though the rate at which those assets would be taxed is unclear.  
  • Interestingly, the infamous and controversial border-adjustment tax is not included in this proposal. Without White House support, it doesn't matter if House Republicans like it—it’s gone.   
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Topics: Macro Strategies

Global Growth Themes and Forecasts (Infographic)

Posted by Craig Burelle, Macro Strategies Research Analyst on Apr 24, 2017 2:30:00 PM

 A synchronized pickup in global economic activity has lifted the spirits of businesses, consumers and investors worldwide. Though many equity markets are near 52-week highs and credit spreads are near multi-year lows, corporate profits are now growing again in most countries. This profit rebound, along with our expectation that global growth will continue to strengthen, could help higher-yielding credit products generate excess returns over government bonds.

The US and UK are in later stages of expansion than Europe, but corporates in each region can still perform well if growth and business conditions continue to improve as we expect. Within EM, individual country performance will likely be driven by political and economic idiosyncratic developments, but broadly speaking, EM assets can benefit from the fundamental improvement we see globally.

Read on for a visual snapshot of our key themes across the globe.

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Topics: Macro Strategies

Turkish Referendum: Local Markets Rally, But For How Long?

Posted by Darcie Sunnerberg, Senior Sovereign Analyst on Apr 21, 2017 2:16:07 PM

So far, the market’s reaction to Turkey’s historic referendum on the adoption of a national presidential system on April 16 has been positive, with local bonds and the currency rallying. Despite a slim margin, this was a major win for President Erdoğan and the Justice and Development Party (AKP). The results lead to further consolidation of power under Erdoğan, who now controls the media (TV, radio and news), the police and the judicial system.

I anticipated this result would be a favorable outcome for Turkish lira (TRY) and the bond market for the short term as it would eliminate a key lingering political uncertainty. However,  longer term this result is likely to be quite negative for Turkey and there are still many questions to monitor.

In my view, the extent of the current rally will depend on the outcome of the following factors/risks: Read More

Topics: Macro Strategies, Sovereign Research

Smartphones & Distracted Driving: What’s the Impact on Auto Insurers?

Posted by Julian Wellesley, Senior Global Equity Opportunities Analyst on Mar 27, 2017 2:55:29 PM

Auto insurers have been caught off-guard. Traffic deaths had been in decline for four decades, as a result of Mothers Against Drunk Driving (MADD), seat belts, crumple zones, anti-lock braking systems, air bags and a string of other safety improvements. Then in the middle of 2015 things changed.  Road deaths jumped 7% in 2015, and rose another 6% in 2016.[i]

This has resulted in an unanticipated spike in payouts for US auto insurers. The reason, according to Matt Winter, President of Allstate,[ii] is that the proliferation of smartphones proved an irresistible distraction just as cheap gas prices and a pickup in the US economy resulted in more drivers on the road.

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Topics: Equity Research

Dutch Election Results: What Do They Mean for France?

Posted by Laura Sarlo, Senior Sovereign Analyst on Mar 21, 2017 1:11:32 PM

Global markets breathed a collective sigh of relief last week when it became clear that Geert Wilders’ anti-European Party for Freedom (PVV) did not win the most votes in the March 15 Dutch election.

But did populism lose? Is the populist wave over? Not so fast. Prime Minister Mark Rutte adopted some populist and nationalist rhetoric during the campaign –remember that he ran ads this past January in all major Dutch papers telling immigrants to “act normal or leave.”


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Topics: Macro Strategies, Sovereign Research

Border Tax:  Should We Anticipate a Backdoor Gasoline Tax?

Posted by Ryan McGrail, Senior Credit Research Analyst on Mar 16, 2017 10:15:00 AM

How might the new administration make good on its promise of a lower corporate tax rate? The House has proposed funding the cut with a new border tax on imports (BAT). While taxing imports may sound straight forward, there are many less obvious details that need to be hashed out including, specifically, whether or not imported crude oil would be exempt from this BAT.

Crude oil imports

Growing US oil production from the booming shale industry over the past few years has allowed the US to reduce its reliance on imported crude oil from the Middle East, Canada and Mexico. However, the US still imports over 7 million barrels per day. While OPEC accounts for a significant amount of the imports (34%), Canada and Mexico combine to account for a larger share at 44% of imports.

While things between the US and Mexico have appeared frosty since President Trump assumed office, relations with Canada have been more favorable with Trump signing an executive order to advance the Keystone pipeline. Additionally, White House press secretary Sean Spicer has indicated that the administration would favor a border tax that would likely apply only to countries where the US has a trade deficit, which would include Mexico, but not Canada.

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Topics: Commodities

Loomis Sayles analysts are career professionals who offer deep knowledge and experience in a diversity of global asset classes and market sectors. These dedicated experts provide the insight essential to supporting our portfolio management teams across a wide range of investment strategies.


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