Baird’s Mary Ellen Stanek Addresses Institutional Investors, Provides Bond Investing Outlook
2012年10月17日 - 9:00PM
ビジネスワイヤ(英語)
At her annual address at the Baird Advisors Institutional
Investors Conference in Kohler, Wis., Managing Director and Chief
Investment Officer Mary Ellen Stanek provided guidance for bond
investors on the economy, inflation, interest rates and portfolio
positioning. Following are highlights from her speech.
Slow Economic Growth Presents Continued Challenges, But
Inflation Not Imminent
On the U.S. Economy: “We see slow growth in the U.S.
economy with continued headwinds. The U.S. GDP growth rate in 2012
was only 2.3%. This sluggish recovery limits job growth. We
continue to have stubbornly high unemployment. September’s job
report of 90,000 new jobs was disappointing; especially when you
consider we need 125,000 just to replace those leaving the
workforce. Underemployment is also an issue with as many as 1 in 6
not fully employed. Adding to the headwinds is heightened US Policy
uncertainty due to the upcoming election, a Lame Duck Congress, and
concerns about a fiscal cliff due to expiring of tax cuts and
mandatory spending limits.”
On Global Uncertainty: “The European debt crisis will
continue to be a chronic issue, but not fatal. Concerns about a
slowdown in China also loom.”
On Inflation: “While we pay a lot of attention to the
huge amount of liquidity that has been injected into the economy,
we believe wage pressures remain benign with continued high
unemployment and capacity in the labor markets. We believe there is
more time before inflation kicks in, but we will watch for any wage
pressure closely. Core inflation today remains near the Fed’s
target with headline inflation below target allowing the Fed to
continue their current policy.”
On Fed Policy: “Fed policy will remain extraordinarily
accommodative. The Fed is in unprecedented territory. Beginning in
2008, the Fed announced and maintained a near zero target interest
rate. It then began QE1 with outright purchase of US Treasury
securities. In 2011, the Fed reiterated their explicit language to
maintain low levels for the Federal Funds rate through at least mid
2013. Next was Operation Twist, where the Fed sold shorter-term and
purchased longer-term government securities in an effort to bring
long term interest rates down. One could argue the Fed faced
unprecedented challenges that led to these policies. They are not
alone in implementing extraordinary monetary policies with the four
most significant foreign central banks growing their balance sheet
assets from $3.36 trillion in late 2006 to more than $9 trillion
today.”
On Fiscal policy: “Fiscal policy is at a crossroads, with
deficit spending unsustainable. We are spending $1.54 for every $1
of revenue. We are concerned about policy choices and the long term
impact on the economy. A credible deficit reduction plan is needed
as we can’t keep 'kicking the can' down the road. A real concern
would arise if China, in a provocative move, would choose to reduce
their purchases of our debt.”
Housing Market Stabilizing, But Consumer
Student Loans May be Next Credit Bubble
On Signs of Hope: “On the positive side, we see positive
improvement on a number of economic measures from the recession
lows including the unemployment rate, consumer confidence, vehicle
sales, corporate profits, and the return on the S&P 500. Junk
bond yields have tightened reflecting a lower risk premium. The
rocky bottoming process in the housing market is finally
stabilizing. We believe housing is very affordable now with low
interest rates having a significant impact on monthly mortgage
payments as a percentage of monthly median income. We’ve even seen
some signs that housing inventory is shrinking. Stabilization in
housing removes a huge negative impacting confidence.
“There are other signs of hope including a US manufacturing
renaissance with some re-shoring of US jobs. The natural gas boom
could be a game changer leading to new infrastructure investment,
less dependence on foreign oil and lower energy costs. We also see
a tech boom as Apple is now the largest ever US company.”
On Student Loans: “While consumers have improved their
balance sheets and are now in better shape, consumer student loans
remain a problem and are potentially the next credit bubble.
Student loans are up while consumer credit less student loans has
fallen. This is a troubling trend.”
Bond Performance and Outlook
“So what does that mean for bond returns? 2012 has been
surprisingly strong. US Treasury Yields are at 60-year lows. Yield
spreads are tighter with valuation in some sectors, in our opinion,
beyond fair value. As investors reach for yields, they are pushing
valuations.
“We continue to believe yields will stay lower longer than
people expect, defying consensus. In this environment, yield curve
positioning and roll down, or the performance boost over time as
securities shorten down a steep yield curve, continue to be
important components of total return.”
On Portfolio Positioning: “We are finding selected
pockets of value in the corporate sector, especially financials.
Net new supply in the corporate sector has slowed with most
issuance replacing existing debt. Strong corporate profits have
improved credit fundamentals. Balance sheets and liquidity are
especially important in the financial sector where capital ratios
have significantly improved while the supply has come down.
“We continue to underweight Treasuries. The bond indexes are
still significantly exposed to sectors we believe are extremely
overvalued. We continue to seek a yield advantage over the
benchmark. We believe spread sectors remain fair to attractive
despite narrowing yield spreads. We believe select securities are
still trading below fundamental fair value.
“On the municipal side, demand outpaces supply with net new
supply contracting by an estimated –$35 million in 2012. Lower
quality and longer-term issues continue to outperform as investors
stretch for yield. But credit challenges persist with downgrades
outpacing upgrades by around 4 to 1 and chapter 9 bankruptcies
increasing. A number of states have significant unfunded pension
liabilities as well, a number we watch closely that could put
additional pressure on munis.
“In this higher risk environment, we believe risk control
continues to be important for both taxable and tax exempt
portfolios.”
About Mary Ellen Stanek, CFA
Mary Ellen is Managing Director and Chief Investment Officer of
Baird Advisors. She has more than 30 years of investment experience
managing various types of fixed income portfolios. Prior to joining
Baird Advisors, Mary Ellen was President and Chief Executive
Officer of Firstar Investment Research and Management Company
(FIRMCO) and was Director of Fixed Income. She is responsible for
the formulation of fixed income strategy as well as the development
and portfolio management of all fixed income services. Baird
Advisors manages $16.8 billion in fixed-income assets.
About Baird
Baird is an employee-owned, international wealth management,
capital markets, private equity and asset management firm with
offices in the United States, Europe and Asia. Established in 1919,
Baird has more than 2,700 associates serving the needs of
individual, corporate, institutional and municipal clients. Baird
oversees and manages client assets of more than $94 billion.
Committed to being a great place to work, Baird ranked No. 21
on FORTUNE’s 100 Best Companies to Work For in 2012 – its
ninth consecutive year on the list. Baird’s principal
operating subsidiaries are Robert W. Baird & Co. in the United
States and Robert W. Baird Group Ltd. in Europe. Baird also has an
operating subsidiary in Asia supporting Baird’s private equity
operations. For more information, please visit Baird’s Web site at
www.rwbaird.com.
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