Mid-Year Investment Outlook: 10 Experts on What to Watch

Posted by Orla O'Brien, Media Specialist on Jun 15, 2015 8:30:00 AM

We spoke with 10 Loomis Sayles investment experts about the most pressing issues and provocative investment themes for the remainder of 2015. What are they watching? Read on for their insights:

Balfour-QuoteFed Rate Hike

“The core Fed members would prefer to hike earlier and slower, rather than later and faster. This risk-management approach makes September a likely time for them to start "normalizing" interest rates. In this post-financial crisis environment, the Fed can't be sure what the neutral rate is for the slowly improving US economy, so moving cautiously will help them edge their way to an optimal rate level. Our best guess is the Fed will hike at a pace of 100 basis points a year - that's half the speed of the last cycle and would mean monetary policy could continue to remain easy for the next two years. But even still, we see the risks tilted toward a slower pace of hikes as higher yields and a stronger dollar begin to weigh on global growth.”

- Jim Balfour, senior global economist

Stokes-QuoteMarket Liquidity

“What’s different right now? On any given day, what you expect to be liquid might not be. Previously, you could rely on one large position, like Mexican government bonds, as a highly liquid asset. In today’s thin and volatile market, it’s crucial to ensure portfolios have diversified pools of liquidity.”

- Elaine Stokes, portfolio manager

 

  

 

Eagan-Quote

High Yield

“Now more than ever, security selection in high yield is important. The best examples popping up right now are high yield names in the energy sector. Opportunistic buying in this market, while oil is still lagging, can potentially provide a yield advantage with reasonable risk.”

- Matt Eagan, portfolio manager

 

 

 

 

Fahey-Quote-1US Dollar Bull Market

“US dollar bull markets have three factors in common, all of which seem to be heating up right now: 

1. Relatively high US interest rates:
 Policy divergence should support the dollar as the Fed aims to hike interest rates this year. There is no sign yet that any of the major central banks want to take their foot off the monetary accelerator.

2. A blow-up abroad that leads to capital flight to the US:
 We are seeing the fabled notion that China's economy can grow at 10% in perpetuity come under pressure, which is causing less capital to be exported to Chinese-related asset plays such as commodities and emerging markets in general, which further supports the US dollar.

3. US economic activity leading to innovation and new deals: The US continues to be a hotbed of innovation, be it the shale oil and gas revolution or Silicon Valley technology. In terms of capital on the move in search of deals, a June 2nd headline from the Financial Times says it all: "US Dealmaking Smashes Records Set in Dotcom and Debt Booms.”

Tom Fahey, senior global macro strategist

Sarlo-QuoteBusiness Investment in Europe

“The real question for the euro area is whether this cyclical upswing can transform into a self-sustaining recovery. So far, growth has been buoyed by renewed consumer activity and improving trade – boosted mainly by cheap energy and a weaker euro. The key to the positive momentum sustaining itself and transforming into a true recovery is business investment – capital spending on production and equipment, research and development– an area which has lagged since the global financial crisis.”

-       Laura Sarlo, senior sovereign analyst

 

Taylor-Quote

Chinese Policy Easing

“Right now, Chinese policy easing has three goals: (1) allow for the orderly refinancing of the local government debt; (2) revitalize the property market sufficiently to stabilize sales and new construction and (3) restore liquidity as Chinese yuan are converted to dollars and head offshore. I expect the government to continue tweaking policy to manage these dynamics – but I do not think the loosening will reactivate a strong growth path for the Chinese economy.”

-  Joseph Taylor, senior sovereign analyst

 

 

Kapoor-Quote

Global Food Trends

“Consumers are moving away from heavily processed foods in favor of fresher and healthier options with simple ingredients. I believe this decline in packaged food trends is structural and will impact traditional global food companies, where they will continue to face volume and pricing pressure. However, the trend of replacing regular meals with more frequent snacking will benefit snack companies, which will in turn encourage innovation with flavor, portion size and packaging.”

- Amit Kapoor, senior equity analyst

 

 

Gilchrist-QuoteHealthcare Stock Performance

“Biopharmaceutical stocks continue to outperform the S&P index – even after three solid years of performance. Continued scientific advancement, like the cancer treatment innovations announced at the American Society of Clinical Oncology’s annual meeting in May, along with a more collaborative FDA and an aging population, should allow healthcare fundamentals to sustain healthy stock performance through the end of the year.”

-       Jeanne Gilchrist, senior equity analyst

 

 

Sundaresh-Quote-1

Crude Oil

“The rally in crude has been too fast, too soon, which will encourage market participants to make less strategic decisions and hurt a sustainable recovery in price. I expect prices to gravitate lower and make occasional forays to the lows of the year (around $45 per barrel) as the battle for market share within OPEC surges and Iran potentially unleashes barrels on the market in coming months.”

- Harish Sundaresh, senior commodities strategist

 

 

 

Lapierre-QuoteUnregulated Shadow Banking

“The growth of the ‘shadow banking’ industry is worth watching closely. Capital requirements and increased regulatory focus have prompted a trend away from traditional banks and towards unregulated entities that can provide credit for companies and individuals in areas like leveraged corporate loans, commercial real estate, and residential mortgages. In addition, we are seeing technology-based startups make inroads in spots like unsecured personal loans, small business credit and student loans.”  

-       David Lapierre, credit research senior analyst

 

 

 

Macro Questions Paper

MALR013437  

This blog post is provided for informational purposes only and should not be construed as investment advice. Any opinions or forecasts contained herein reflect the subjective judgments and assumptions of the authors only and do not necessarily reflect the views of Loomis, Sayles & Company, L.P. This information is subject to change at any time without notice.

Topics: Credit Research, Macro Strategies, Sovereign Research, Equity Research, 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.


 

Subscribe to LandScape

Follow Us