Author: Doug Wilde

WCM Chart of the Week for November 8, 2019

The global rally in stocks and key US equity indices hitting all-time highs are again garnering the majority of the financial press’ collective attention. We however prefer to focus on government bond markets. Long-term interest rates may have bottomed towards the end of this past summer. 10-year government bond yields in key developed economies are on the upswing and may even have positive readings in Japan and the Eurozone before year end. We find the upward interest rate trajectory interesting in the context of the US Federal Reserve’s recent decision to lower its target rate. It is encouraging that yields are rising together which may be a signal that economic conditions across the globe are stabilizing and safe haven asset prices are falling. [chart courtesy Bloomberg LP © 2019]

WCM Chart of the Week for November 1, 2019

Growth stocks in the US have outperformed value stocks for the better part of the past three years with the exception of the US Fed induced sell off at the end of last year. However, since mid-August value stocks have outpaced growth stocks by a considerable amount rallying nearly 8% versus 3.5% according to S&P 500 Value and Growth indices.  If value stocks can continue to outperform or even keep pace with the overall market, we would view this as a positive development because it could mean that broader participation is developing.  That is important because the S&P 500’s largest the sector, Information Technology, continues to outperform, powering the market higher.  We find this interesting because usually technology stocks outperform with growth leading value. [chart courtesy Bloomberg LP © 2019]

WCM Chart of the Week for Oct. 11, 2019

Volatility in US Treasury prices has been building for the past six months or so as measured by the ICE Bank of America Merrill Lynch Move Index. That is not all that surprising given the magnifying effect even small interest rate movements have on Treasury prices in today’s low rate environment.  The challenge investors face is that bonds, particularly longer-dated issues, offer anemic income streams and the likelihood of principal erosion as rates rise to more normal levels.  We continue to maintain lower duration within fixed income allocations than our benchmark because we believe that the long end of the yield curve, here and abroad, offers little investment merit and the potential for a great deal of volatility.

WCM Chart of the Week for September 23, 2019

On this convening day for the UN Climate Action Summit, we take a fresh look at the benefits of climate-centric fixed income investment strategies. There is a persistent myth that disciplined ESG investing dampens investment performance, which we believe is short sighted.  This week’s chart examines the total return properties of the Bloomberg Barclays MSCI Global Green Bond Total Return Index versus the Global Aggregate equivalent index.  The green bond Index is based on issuers that adhere to the Green Bond Principles which include energy efficiency, renewable energy, pollution prevention and control, sustainable management of land and natural resources, potable water and wastewater management, and clean transport among other critical green activities. What this relationship shows us is that there are periods when the green index underperforms and also periods when the index outperforms the broader aggregate index.  This index started at the end of 2013, so we have nearly seven years of data to evaluate.  According to Bloomberg, over that time frame (as of September 20, 2019), the green index is up 22.3% compare to 12.2% for the global aggregate or annualized total returns of 3.6% and 2.0%, respectively.  Clearly, over the longer term, green-oriented fixed income investors have done well by investing in issues that are doing good as compared to the overall global bond market. [Chart courtesy Bloomberg LP (c) 2019]