Thursday, October 4, 2018

Investment Perspectives: Higher Rates, Market Debt, and Seasonal Wisdom

This month's Investment Perspectives discusses portfolios and higher rates, emerging market debt, and potential for the market heading into 2019.

You can read the full Investment Perspectives here.

In this month's issue:

“Stocks Aren't Afraid of Higher Rates" Mark Luschini
A share of common stock is a claim on the future earnings of the company that issued it. Equity investors are enticed to buy the share of a company, or invest in the broader stock market, when earnings are anticipated to grow. Investors project what the expected earnings stream is to be and come to a price they are willing to pay as a function of the interest rate used to discount those earnings back to the present day.

“Value or Trap: Emerging Market Debt” Guy LeBas
Emerging market, or EM, debt has had quite the first three quarters of 2018. While country-by-country performance has varied wildly (Argentina, anyone?), on average “local currency” debt is down -6% on the year in U.S.-dollar terms, an underperformance versus the global aggregate bond market index’s -2%.

“The Season Could be the Reason" Greg Drahuschak
In recent times, variance from long-established patterns has become the norm. Seasonal patterns suggest that September typically is the worst month of the year. This year September was not the worst month of the year, but instead was the sixth best.