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A Sustainability Framework: Societal Shifts as Investment Risks
Successful long-term investing depends upon the identification of sustainable companies. We believe traditional investment analysis tends to underestimate some risks faced by companies today. In particular, we see rising risks to sustainability from the potential breakdown of relationships between industries and companies with society. Each company and industry operates under a "societal license” that, if damaged or revoked, can ultimately
ECB Signals Easing, But What’s Left in the Policy Arsenal?
Acentral banker’s nightmare is losing control of inflation expectations. Whereas decades ago the challenge facing major central banks was reining in overly high inflation expectations – a process that ushered in central banks’ independence and inflation targets – the European Central Bank’s (ECB) challenge today is reviving unduly low expectations up toward its stated aim of “inflation rates below, but
5 Key Investment Themes for the Remainder of 2019
Rick Rieder and Russ Brownback highlight the investment themes that they think will drive markets and dominate debate within the investment community over the next several months and beyond. Over recent weeks, we have been vocal about five “big themes” for markets that will likely dominate the second half of 2019. These themes take stock of a collection of secular
Interest Rates: Naturally Negative?
It is no longer absurd to think that the nominal yield on U.S. Treasury securities could go negative. Last week the German 30-year government bond yield dipped into negative territory for the first time ever. Around $14 trillion of outstanding bonds worldwide, or 25% of the market, now trade at negative yields, according to Bloomberg. What was once viewed as
On the Other Hand
Memo to: Oaktree Clients From: Howard Marks Re: On the Other Hand It often happens that just as I’m about to release a memo, I come across something that absolutely has to be incorporated. That was the case on June 12, the day “This Time It’s Different” was published. I was reading a first-quarter report from Ruffer, a London-based money
Outlook on Europe
European equity markets have been caught in the middle of opposing forces, mainly growing tensions around global trade and increasingly dovish central banks. This has pushed European government bond yields to fresh lows and caused bond-sensitive sectors to climb higher, further stretching valuations. In this environment, it is becoming increasingly important for investors to be discerning, to focus on fundamentals
Weighing the Week Ahead: Four Risky Hurdles
The economic calendar is massive, and that is just the start. Earnings season is in full swing. US/China trade talks resume. And finally, the FOMC announces its interest rate decisions. Expect plenty of commentary on the individual news items, but the real question is: How deftly can the market leap the four hurdles? (Data, Earnings, Fed, and Trade = DEFT).
High-Yield Credit in a Fed Easing Cycle
High-yield corporate bond spreads and bank loan discount margins typically widen when the Fed is lowering interest rates. Here are the key takeaways from our third quarter High-Yield and Bank Loan Outlook report: Investors may be tempted to go down in quality in anticipation of a Fed-induced rally in leveraged credit. History suggests this would be ill-advised. On average since
Brazil Takes Big Reform Step
Pension funding has been an issue in many parts of the world and has certainly been a hot topic in Brazil. President Jair Bolsonaro’s election ignited market optimism on promises to reform pensions to get Brazil’s fiscal house on a firmer footing. The probability of this being delivered has increased considerably after approval of a new pension reform bill in
Farewell to Data Dependence
Until recently, Fed Chair, Jerome Powell sounded a consistent theme: the Fed is data dependent and will stay that way, unswayed by noise or pressure from politicians. When the FOMC released its rate decision last month, it got as dovish as it could without actually cutting short-term rates. It downgraded its assessment of economic growth from "solid" to "moderate" while