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Results 151–197
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Fixed Income Outlook October 2015: Is China Really That Important?
Negative sentiment permeated the stock and bond markets this quarter, with August taking September’s usual honor as the worst month of the year, so far, for stocks. In particular, concerns about China weighed on the markets, and the Federal Reserve (Fed) Governors fanned these fears with comments at the September Federal Open Market Committee (FOMC) meeting, when they voted to hold the federal funds rate steady.
Chugging Along
Sitting down to write this quarter’s Outlook we feel a bit sheepish. Despite all the headlines and drama around the world (e.g., Greece, Mid-East turmoil, China stock market bubble), not much has changed in our outlook for the U.S. economy or the U.S. financial markets. The U.S. economy appears to have rebounded in the second quarter from the first quarter swoon.
Don’t Let the Noise Keep You Up at Night
Three subjects have concerned the markets recently: a Greek debt default and possible exit from the European Union (Grexit), the Federal Reserve’s (the Fed’s) normalization of interest rate policy and potential bond market illiquidity following a rise in interest rates. The first two are binary outcomes, which have been debated in the marketplace for years. While discussing these possible outcomes ad nauseam may be a palliative to some, in our view it doesn’t really provide much meaningful, incremental information until more definitive actions are taken.
Searching for Clarity Among the Dots
In 1886 Georges Seurat finished his most famous painting, A Sunday Afternoon on the Island of La Grande Jatte. Seurat used a new technique, Pointillism, in which small dots of color are applied to the canvas to express an image. More recently, Janet Yellen and the Federal Open Market Committee (the FOMC) updated their own version of Pointillism to express an image called the dot plot – a graphical representation of each FOMC member’s forecast of future federal funds (fed funds) rates.
U.S. Consumers Gaining Ground
In early 2015 global financial markets continued to be buoyed by a combination of low interest rates, central bank liquidity and positive, albeit modest, economic growth. For some time we have been talking about the "Goldilocks" backdrop of slow growth, low inflation and low interest rates that has been very rewarding for financial assets.
Equity Investment Outlook: More of the Same
by Team of Osterweis Capital Management,
We are of the view that the conditions for further gains in the bull market that began in early 2009 are still intact and that the conditions for a true bear market are not. The market could, of course, be subject to corrections ? it always is ? but we believe the trend is still upward.
Fixed Income Investment Outlook: 2014 is Over. Long Live 2014!
by Team of Osterweis Capital Management,
We believe that at current yields there is no investment grade ?fat pitch? at this time. Our focus remains on keeping duration short and layering-in higher yielding paper, especially on sharp corrections in markets like we have seen recently. We believe that the appropriate time to take a swing at investment grade bonds will be when yields are much higher and the economy is teetering towards recession.
2014 Year End Letter
As 2014 comes to a close, we want to provide an update on the energy sector. Energy has been making headlines as oil prices have reached unexpected lows. As discussed below, while the decline in oil prices is creating volatility in the energy sector, we believe that there continues to be opportunity in this sector and that the low oil prices should prove beneficial to U.S. and global economic growth.
Steady as She Goes
For some time now we have been making the case for a long-term bull market in U.S. equities. This has rested on the prediction of a gradual economic recovery devoid of inflationary pressures, played out against a very accommodative monetary backdrop. So far, this is exactly what has occurred. But as we all know, trees dont grow to heaven and nothing lasts forever. Therefore the relevant questions we ask ourselves every day are: (1) what could go wrong and (2) when should we start to worry? We shall devote this quarters Outlook to the things we worry about.
When Will Rates Potentially Rise?
by Team of Osterweis Capital Management,
When 2014 started, some Wall Street strategists predicted a continuing rise in interest rates as U.S. economic growth accelerated and the Federal Reserve (the Fed) reduced its monthly stimulus. Instead, it has been a one-way street in government bond markets as they continued to deliver low yields at higher prices. In August, the yield on the benchmark U.S. 10-year Note fell to 2.3%, back down to June 2013 levels.
The Sub Par Recovery Continues: Fixed Income Investment Outlook
There is a well-known trading adage, Sell in May and go away, which espouses selling your stocks to avoid a seasonal pre-summer decline in prices. Selling in May (or April or June) did not work this year as the markets continued their rise to new highs. Perhaps the reason for this is that the weather-induced economic weakness of the first quarter has been followed by increased optimism for growth in the second quarter and beyond. We have seen inflation, even in the core (ex- food and energy) rise, although this may be transitory.
U.S. Equities Continue to Look Attractive: Equity Investment Outlook
by Team of Osterweis Capital Management,
As we sit down to write this Outlook we are struck by two trends: the consistency of the economic recovery in the U.S. and the dramatic escalation of geopolitical turmoil. Whether these two trends will collide to derail the bull market is an open question, but usually geopolitical flare-ups have only short-term effects and do not overwhelm long-term economic trends. Thus, they tend to appear as hiccups in stock market progress.
Fixed Income Outlook
by Team of Osterweis Capital Management,
Given that the Fed is likely to complete its asset purchases this year and may raise rates in early 2015, we still feel that Treasuries and investment grade bonds are unattractive. Although yields in the high yield universe are low by historical standards, they still give us a decent cushion against rising rates, especially at the shorter end of the maturity spectrum. Maintaining a shorter duration exposure in high yield and some convertible bonds, as well as a cash reserve, continues to make sense.
Equity Outlook
by Team of Osterweis Capital Management,
Short term, we would not be surprised if the market took a breather after its strong gains last year. Additionally we may see volatility related to news coming out of the Middle East and Russia. But longer term, we remain very optimistic on the outlook for U.S. equities. In addition to the reasons we discussed above we believe U.S. equities are very attractive relative to the alternatives. The great bull market in bonds appears to be over. The great decades of emerging market growth appear to be behind us.
Can Equities Continue Their Rise? Equity Investment Outlook: January 2014
2013 marked the fifth year of recovery following the near-death experience of the 2008 global financial system meltdown. From a low of 677 in 2009, the S&P 500 Index (S&P 500) finished 2013 at 1,848, delivering a stunning 203% total return from the low. Over the same period, the total return for the Dow Jones Industrial Average was 188%. The tech-heavy and arguably more speculative NASDAQ logged a 249% total return. These very large equity returns reflect both a strong recovery in corporate profits and a dramatic clean-up of our financial system.
Let the taper begin! Fixed Income Investment Outlook
by Team of Osterweis Capital Management,
At the December meeting, the Federal Reserve (the Fed) decided to reduce its purchases of Treasury and mortgage securities (a.k.a. quantitative easing/QE) beginning in January 2014. This answered the question of when the taper would begin, and the markets reacted predictably. Two questions remain, however: How long until the Fed completely winds down QE; and when will short rates begin to reflect the improving economy? We feel it may be sooner on the former and could be quite some time on the latter.
Fixed Income Investment Outlook
by Team of Osterweis Capital Management,
Last quarter we wrote about the confusion that can be created by the Federal Reserves (Feds) two official mandates: keeping inflation in check and ensuring full employment. We also pointed out that given the rather fragile economic backdrop, talk of letting the economy stand on its own two feet by reducing their bond buying might be premature. During the third quarter, it appeared most economists felt comfortable that the Fed would indeed begin tapering its purchase of Treasuries and mortgage securities after the September Federal Open Market Committee (FOMC) meetin
Equity Outlook
by Team of Osterweis Capital Management,
As we write this outlook, our political leaders once again have succeeded in holding the U.S. government budget, and by extension the financial markets and the broader economy, hostage to their respective political agendas. We believe it is important to avoid getting caught up in the drama on Capitol Hill and remain focused on the slow but continued healing taking place in the U.S. economy.
Fixed Income Outlook
by Team of Osterweis Capital Management,
The question we keep asking is Will the real Fed mandate, please stand up? The Federal Reserve (the Fed) traditionally is charged with keeping inflation in check, but it also has a second mandate to ensure full employment. This dual mandate can occasionally create general confusion as to what is the best policy at a given time and which policy goal the Fed is trying to achieve. Today, we are at a juncture where the Feds mandates may not clearly align with stated future monetary actions.
Equity Investment Outlook
by Team of Osterweis Capital Management,
Every so often we write an Investment Outlook with conclusions that prove to be both accurate and worth repeating. Such is the case with our prior outlook issued in January 2013. In it we stated that At the risk of sounding complacent, we believe that the fundamental trends that produced such favorable results in 2012 are still in place and should support another good year in 2013. We are not blind to the challenges and uncertainties that still face us, nor do we believe that the year ahead will be devoid of volatility.
Fixed Income Investment Outlook
by Team of Osterweis Capital Management,
Based on the nearly 2,500-point rise in the Dow Jones Industrial Average since last June, it appears that Mr. Bernanke has been successful in increasing demand for risk assets and creating some exuberance in the stock market. Short-term volatility in the markets may be driven by questions about the Feds eventual exit strategy and how effectively the politicians will deal with U.S. fiscal issues. The good news is that that the U.S. economy is growing, albeit slowly, unemployment is falling, again slowly, and consumer confidence is improving.
Equity Investment Outlook January 2013
by Team of Osterweis Capital Management,
Despite many headwinds and amid great uncertainty, both the U.S. economy and stock market enjoyed a rather good year in 2012. Real Gross Domestic Product ("GDP") grew around 2%, and the stock market, as measured by the S&P 500 Index, returned 16%. At the risk of sounding complacent, we believe that the fundamental trends that produced such favorable results in 2012 are still in place and should support another good year in 2013.
Fixed Income Investment Outlook
by Team of Osterweis Capital Management,
We continue to feel that the mismatch between yield and interest rate exposure means that investment grade bonds are less attractive compared with the non-investment grade universe, especially in shorter maturities. Treasury, investment grade corporate and high yield bonds have yields and effective durations that are virtually unchanged compared to levels three months ago. Yields on short-dated high yield paper have actually risen a bit and are still, in our opinion, the most attractive sector we look at in terms of interest rate risk.
October 2012: Fixed Income Investment Outlook
by Team of Osterweis Capital Management,
Like last year, this summer's quarter was eventful. Investors entered the quarter with high expectations that the European Central Bank (ECB) and Federal Open Market Committee (FOMC) would provide the markets with more monetary largesse. On July 26th, Mario Draghi, President of the ECB, vowed to "do whatever it takes" to preserve the euro. Risk assets then began an anticipatory rally heading into some key events in mid-September.
October 2012: Equity Investment Outlook
by Team of Osterweis Capital Management,
Equity and other "risk" assets rallied in the third quarter in anticipation of further monetary easing by central banks around the world. The prospect of increased liquidity from the central banks appears to have focused investor attention, at least temporarily, away from the generally softer economic data that continue to emerge from Europe and Asia.
Equity Investment Outlook
by Team of Osterweis Capital Management,
In the politically correct atmosphere that permeates many of our college campuses, the euro-centric view of world history is regarded as hopelessly anachronistic, small-minded and possibly even racist. In the last year, they have become hopelessly euro-centric, rising or falling in concert with the news coming from the eurozone. A few years ago the markets focused on growth in emerging markets. Today, they focus on problems in the developed world.
Fixed Income Investment Outlook
by Team of Osterweis Capital Management,
Recent escalations in the euro crisis and weaker-than-expected global economic data have led to widespread calls for further stimulus. Global leaders believe they are addressing the issue, with China and the ECB lowering interest rates and the Bank of England announcing an additional 50 billion sterling of quantitative easing. We are skeptical about the benefits of such policy action and believe that the U.S. and Europe each require different solutions to solve their fiscal issues.
Fixed Income Investment Outlook April 2012
by Team of Osterweis Capital Management,
The Feds easy money policy will likely not reverse in the near term, but may do so before 2014, if economic growth strengthens meaningfully; some inflation is also acceptable to the alternative deflation. We are seeing some economic strength in the U.S., which is translating into higher equity prices (and hopefully higher capital gains). We are still generally avoiding exposure to interest rate risk found in Treasuries and investment grade bonds. We believe the easy money has been made there and we are not currently being compensated for the risk of rising interest rates.
Equity Investment Outlook April 2012
by Team of Osterweis Capital Management,
We think stocks are reasonably priced on an absolute basis and extremely attractive relative to bonds. Bonds have performed well over the past three decades, but with interest rates at record lows, there is not much room for bonds to continue outpacing stocks on a total return basis. Meanwhile, companies are steadily increasing dividends. Even Apple recently instituted a dividend. For some time, investors have been lowering their exposure to U.S. equities. We believe this trend should reverse, especially once interest rates start to rise and bond market returns turn negative.
Equity Investment Outlook
We believe that 2011 was an aberration in terms of stock market correlations and that gradually stocks will once again perform based more on their individual results and outlooks and less on the markets en masse risk on, risk off vacillations. Despite our near-term caution, which reflects a very uncertain economic and political climate, we are increasingly convinced that equities are poised for solid longer-term returns. Over the past ten years, stocks generally underperformed bonds. This is highly unusual. Stocks are now reasonably priced and profits are expected to expand.
Fixed Income Investment Outlook
An incongruity developed during the 2nd half of 2011. As Treasuries continued their rally that began after the S&s, US equity markets also rose from their August lows. Normally, a rally in Treasuries implies that investors are in a risk off mode, fear of economic weakness causes investors to seek safe havens, like US Treasuries. Conversely, a rally in equities is perceived as a risk on mode, meaning that the sky is clearing and it is safe to invest again. With the Q4 rally in both the risk on and the risk off markets, the question arises: What is causing this anomaly?
Fixed Income Investment Outlook
by Team of Osterweis Capital Management,
We continue to favor short-term high yield securities.While the high yield market has generally been under pressure due to fears of lower economic growth, lower gross domestic product growth does not necessarily translate into weaker credit fundamentals. In light of all the uncertainty in the market, we have generally reduced our exposure to convertible bonds and have continued to favor bonds with high coupons that we think are likely to be refinanced before maturity.In addition we are keeping some cash on the sidelines so that we are in a good position to buy as future opportunities arise.
Equity Investment Outlook
by Team of Osterweis Capital Management,
During the third quarter, the stock market plunged as investors hopes for a sustained U.S. economic recovery dissipated and fears of a world-wide economic slowdown and possible U.S. double-dip recession increased. The U.S. faces several major structural headwinds including a moribund housing sector, high unemployment, bank credit restraint, and a growing and worrisome federal debt. Underlying these and other problems is the depressing effect of the end of the debt super cycle.
Equity Investment Outlook
by Team of Osterweis Capital Management,
As evidence of a global economic slowdown accumulated, the stock market suffered a correction during the second quarter. This is hardly surprising given the market?s strong recovery from the depths of the 2008-2009 financial meltdown. After surging just over 100% from its low in March of 2009 and nearly 30% since August of just last year through the end of the first quarter 2011, the S&P 500 Index needed a breather. The 7% correction that occurred from the April high through the June low looks relatively modest to us in light of how far and how fast the market has rallied.
Fixed Income Investment Outlook
by Team of Osterweis Capital Management,
The equity and high yield markets seem to be reacting to renewed fears of sovereign debt defaults in Europe and slower economic activity in the U.S. The duration and ultimate severity of our economic slowdown is still in question, as inflation fears seem to have temporarily abated and the yield curve in the U.S. is steep, which has historically preceded economic growth. We are avoiding highly leveraged companies and longer-dated bonds, which may be vulnerable if a double-dip recession were to occur. There seem to be many sellers of shorter-dated bonds from which to choose.
Equity Investment Outlook
by Team of Osterweis Capital Management,
The bifurcation of the market, with small caps outperforming large caps, has led to a valuation disparity between overvalued small caps and undervalued large caps, which we believe can be profitably exploited. We, and others, have observed for some time that many excellent, growing large cap stocks are quite cheap relative to both the overall market and to more richly priced smaller companies. We expect that, over time, more investors will agree and large cap stocks may then begin to outperform the general market, as they have to a modest extent this year.
Fixed Income Investment Outlook
by Team of Osterweis Capital Management,
Investors sometimes walk a fine line between either over-reacting to temporal changes, which ultimately don?t have a lasting impact on either the economy or the markets, or underestimating the impact of real risks that can bring about lasting and meaningful changes. Currently, the main areas of concern are the Japanese triple disaster, the Middle Eastern/North African ?Arab Spring,? and inflation. While we do not believe the Japanese and Middle Eastern situations pose a real threat to financial markets long term, we do believe inflation may.
Equity Investment Outlook
by Team of Osterweis Capital Management,
During the fourth quarter, the stock market staged a strong rally, reflecting both growing evidence of a sustained economic recovery and the reversal (thanks to the Republican victory in November) of the seriously anti-business tone in Washington. These two factors enabled investors to begin thinking not just of a recovery from the recent crisis and recession, but of a more sustainable and enduring expansion. As a result, they were able to bet on a longer stream of favorable corporate earnings.
Fixed Income Investment Outlook
by Team of Osterweis Capital Management,
As for our strategy, we continue on a steady course of balancing major risk aversion while opportunistically seeking returns. Although there are no longer any soft pitches like there were in late 2008 and early 2009, we feel that there are still enough bond issues from well-run companies that offer reasonable returns without going too far out on the risk or duration curves. We do not believe it is prudent to lower quality standards or to take excessive duration exposure at this time in order to increase returns. We believe there will be better opportunities for that in the future.
Fixed Income Investment Outlook
by Team of Osterweis Capital Management,
Low yields, high corporate debt issuance, increased monetary stimulus and the rising dollar do not mean that growth will accelerate any time soon; the outlook of a slow and meandering recovery still holds. Corporations continue to rebuild balance sheets and margins at the expense of hiring and investment. While this bodes well for future debt repayment, the outlook is not rosy for job seekers. When the job outlook does change, however, and the economic pulse quickens, the era of low interest rates could end quickly.
Equity Investment Outlook
by Team of Osterweis Capital Management,
Housing is still deflating, but commodities are mixed. The concern longer term is that the Fed is printing money in order to stimulate the economy. At some point, all this liquidity in the system could cause inflation to accelerate, perhaps to a level that the Fed cannot contain. We are not forecasting either serious deflation or serious inflation. On the other hand, we do not regard the probability of a negative outcome as trivial.
Fixed Income Investment Outlook
by Team of Osterweis Capital Management,
It is unlikely that the Federal Reserve will soon reverse its easy-money policies amidst worries about the European government debt crisis, meager job growth and low inflation in the U.S. In light of all these concerning developments, Osterweis continues to take a conservative approach by focusing on securities that will experience less volatility in the current unpredictable environment. These include short duration bonds and certain 'cushion' bonds, which are longer-term, high coupon bonds that will likely be refinanced in the near term, well in advance of their maturities.
Equity Investment Outlook
by Team of Osterweis Capital Management,
The economy is not headed towards a serious double-dip recession, but rather towards a slowdown or moderation of its growth rate. That is, the economy has been improving, just not as fast as investors envisioned earlier this year. Osterweis is therefore staying the course, focusing on solid companies with strong or improving balance sheets and a history of stable or growing dividends. They are also keeping some cash as a buffer against further erosion in the overall market and as a buying reserve to use when compelling bargains emerge.
Fixed Income Investment Outlook
by Team of Osterweis Capital Management,
The consensus is that we are well past the crisis point and will gradually see more economic sunshine. While Osterweis generally agrees, there are a couple factors that are prompting the firm to keep a conservative posture. In particular, they are concerned with China?s large trade surplus and the prospect of rising interest rates in the U.S. While the market may remain buoyant for some time as the economy recovers, Osterweis does not believe there is much opportunity cost at this time in taking a more conservative posture and waiting for the next good buying opportunity.
Equity Investment Outlook
by Team of Osterweis Capital Management,
During the first quarter, the stock market continued to work its way higher as evidence mounted that the economic recovery was solidly underway. While Osterweis is reasonably comfortable with the very near term outlook for the economy, it is quite concerned with the longer-term implications of the rising federal deficit, as well as about how the economy will perform as monetary and fiscal policy inevitability shift from maximum stimulus to a more neutral stance. The company, therefore, wants to focus its 'bets' more on individual companies than on broad macro-economic trends.
Fixed Income Investment Outlook January 2010
by Team of Osterweis Capital Management,
Osterweis Capital Management says in its fixed income investment outlook that increased investor appetite for risk drove up prices of high-yield bonds, equities and other financial assets in 2009. Investors may want to avoid Treasury bonds and other underweight longer-dated assets in order to avoid the impact of a possible interest rate hike.
Equity Investment Outlook January 2010
by Team of Osterweis Capital Management,
In its equity investment outlook, Osterweis Capital Management says it expects the economy to continue expanding this year, but notes that it might face headwinds from a double dip in the housing market and an unwinding commercial real estate sector. Stocks recovered sharply last year in the face of expected profit recovery, but may but may suffer temporary setbacks if the economy disappoints.
Results 151–197
of 197 found.
