Chairman of Investments and Global Chief Investment Officer Scott Minerd leads Guggenheim Partners’ macroeconomic and investment research functions. Together, our team of economists, strategists, and analysts provide insights and analysis on markets and opportunities via weekly
Macro Views, in-depth Market Perspectives, Sector Reports, and media appearances.
January 30, 2015
Good Company, Bad Stock
The U.S. economy is in the best shape out of any economy in the world, but it reminds me of a great business with a bad stock. Despite its underlying economic strength, I believe U.S. equity markets are likely to underperform those of less healthy economies in the long run. When I look around the world at economies that have many more problems than the United States, I see more upside potential for equity valuations and market performance in places like Europe, China and India.
January 23, 2015
The Consumption of Davos
The European Central Bank’s announcement of quantitative easing quickly became the consuming topic at the World Economic Forum’s Annual Meeting. While I view this as arguably the most monumental event in the history of the European Union, the question remains whether it will be enough to stimulate Europe’s flagging economy.
January 16, 2015
Buy the Rumor, Sell the News
At current levels of overvaluation, the only factors holding interest rates down are the expectation of declining inflation as a result of the oil shock and the prospect of quantitative easing in Europe. This means we may be facing the old Wall Street adage of “buy the rumor, sell the news” when it comes to Treasury prices. Once the one-time effect of declining oil prices has passed, inflation is likely to return to the underlying trend, which is higher than today. This, combined with European Central Bank announcement of quantitative easing, could mark the end of the recent spike down in interest rates.
January 09, 2015
Supply Shock and Awe
The 1985-86 bear market in oil was the result of oversupply—too much oil was brought online relative to demand. During that period, prices declined more than 67 percent over four months or so. When oil prices started to rise again in April 1986, credit spreads started to tighten a few months later and within 12 months, the stock market was up over 20 percent. If history is any guide—and in this instance, I believe it may be—we are likely to see a similar situation play out today. But investors beware in the near-term. Even at $48 per barrel, oil is still a falling knife.
January 08, 2015
High-Yield and Bank Loan Outlook - January 2015
While the U.S. economy remains strong, equity and credit markets are becoming increasingly susceptible to certain macro-driven risks, such as the decline in oil prices. Plunging oil prices have dimmed the outlook for the energy sector and have caused spread widening across investment-grade and high-yield U.S. fixed-income assets. While we believe risk of defaults in energy is limited in the near term, now is the time to monitor significant exposures that may cause underperformance in potentially worst-case scenarios.
December 17, 2014
A Tale of Two Markets
Investors should prepare for an extended period of depressed oil prices—oil still has substantial downside room to run before reaching a level of stability. As oil continues its decline, pressure is increasingly mounting on credit markets, especially high-yield corporate bonds, where energy-related borrowers represent 15-20 percent of the market. The flip side is that as spreads widen, we get closer to the levels where large investors start to see value.
December 11, 2014
Oil, Roil, and Turmoil
The behavior of global financial markets this week could be characterized as “oil, roil, and turmoil.” The free fall in oil has equities under pressure and bonds rallying. The recent price action is betraying that we potentially have something darker and more sinister on our hands than we may have thought just a few weeks ago. If things play out as we suspect, both interest rates and oil prices will head meaningfully lower in the near term.
December 04, 2014
The Dark Side to Falling Oil Prices
Russia needs oil at $100 a barrel to support its economy, and many other oil-dependent economies rely on oil prices well north of current levels. A recession in countries such as Russia will have significant knock-on effects, particularly for European exporters, creating another headwind for the beleaguered euro zone economies. An oil-price-induced negative feedback loop would stifle global growth and could even lead to political instability in any number of oil-dependent nations.
November 20, 2014
Falling Gas Prices Fuel Holiday Cheer
The domestic economy will benefit from the consumer spending power released by the decline in gasoline prices as well as rising equity prices. Despite the positive backdrop for the nation’s economy, though, the current rally in U.S. equities has still not been confirmed in the NYSE Cumulative Advance/Decline Line. The next few weeks will determine whether the current rally is sustainable.
November 07, 2014
'Risk On' for Now
U.S. high-yield bonds, leveraged credit, and equities will likely outperform in the coming months, but there are obstacles ahead.
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