Page 29
The Fed has taken extraordinary measures since 2008 to help keep long-term interest rates low through two rounds of quantitative easing, known as “Operation Twist,” followed by a third round of easing that targets the mortgage-backed securities market.
It is often declared that a good time to buy a stock is when it’s on sale. But at Putnam, we believe that valuation — the relationship between price and earnings, or between price and free cash flow, to take two common examples that indicate a stock’s relative “cheapness” — is rarely all that matters.
The high-yield sector may offer more attractive returns with potentially lower volatility than equities, based on a comparison of the historical profiles of the two asset classes and analysis of current credit risk conditions. As interest rates rise, bond prices fall. Lower-rated bonds may offer higher yields in return for more risk. Distress in the
The U.S. dollar appears relatively stable in a world of structural imbalances.
Despite the uncertain macroeconomic environment, we continue to believe that a strategy that relies on rates declining further to drive returns is a risky proposition. At current levels, interest rates would not have to increase much in order for investors to start seeing price declines in Treasuries and certain other high-quality bonds that today offer
Active fundamental research indicates the housing sector, along with areas of the energy and health-care industries, offer attractive opportunities for investors today.
With the ongoing European debt crisis, a slowdown in China’s economic growth, and concerns about a so-called “fiscal cliff” at the end of 2012 for the United States, market volatility jumped in the second quarter compared with the first. The Chicago Board Options Exchange Volatility Index (VIX), also known as the “fear gauge,” only recently
In the years leading up to the global financial crisis, growth across a number of countries was relatively homogenous. That changed in 2008, as nations implemented markedly different policy responses to the recession. Many emerging economies that sidestepped the debt crisis altogether are now damping down rapid growth, while developed economies continue to experiment with
Generous yield spreads and a low default rate on corporate debt give high-yield bonds attractive investment potential in today’s market. Lower-rated bonds may offer higher yields in return for more risk.