New Century Advisors’ market commentaries offer a unique and insightful perspective on capital markets topics.

March 2019: Auto Loan Myth, Index Changes & M&A Fallout: Market Notes

  • Debunking The Auto Delinquency Myth
  • Index Deep Dive – How Changing Sector Composition is Driving Sector Performance
  • Goodwill Hunting – M&A Chickens Coming Home to Roost

February 2019: Value, Inflation, Australia: Market Notes

  • Is NOW the Time to Buy Value?
  • US Inflation – Core Remains Firm
  • Australia – Is the RBA Going ZIRP?

January 2019: Looming Fed Pause & Other Market Notes

  • Residual Inflation Sensitivity
  • Oil Services Not Participating in the Production Boom
  • Looming Fed Pause and Key Investment Themes

July 2018: The US Agg - More Risk / Less Diversity

  • Index duration has sharply increased
  • Higher Treasury weight means lower yield vs. the past

May 2018: Why Does my TIPS ETF Have a Negative Return?

  • Misunderstood asset class doesn’t always perform as people expect
  • Separate account investors have more options for inflation protection

January 2018: Tax Reform Impact on the Credit Markets

  • The corporate tax rate cut puts the US in the middle of the distribution of global tax rates…fiscal stimulus coming late in the cycle
  • How much does it matter? Event risk potential.
  • Potential impacts must factor into credit models.

November 2017: Flatter Curve Ahead

  • October CPI Report bolsters the Fed’s firmer expectations (and ours)
  • Market still trails the Fed in 2018 rate hike expectations
  • More rate hikes likely - keeps the flattening pressure on the curve
  • Ellen Safir on fixed income investing in a rising rate environment

November 2017: Powell New Fed Chair

  • Status quo on monetary policy but focused on deregulation of financial institutions
  • Fed still trending hawkish
  • Market underpricing Fed hikes through 2018
  • Powell nomination suggests further curve flattening and should bode well for bank stocks

October 2017: CPI - Hurricane Headline vs. Calm Core

  • September CPI rose 0.5% MoM (2.2% YoY), led by a (temporary) 13% rise in gasoline prices due to Hurricane Harvey
  • Core CPI was more muted, rising just 0.127% MoM (1.71% YoY), a touch below expectations. Core CPI is up 0.49% in the past 3 months, or 1.97% annualized, after nearly flatlining this spring
  • The hurricane impact was limited outside of gasoline (but stay tuned)
  • Services and goods continue to diverge within Core CPI
  • The Fed is still likely to hike in December (the market agrees)
  • Looking to next year: Upside risks to inflation but a glaring question overhangs the path of monetary policy

September 2017: Inflation Gets Back on Track

  • After five weaker-than-expected prints, CPI picked up in August, boosted by energy and shelter in particular
  • While much of the headline increase was due to Hurricane Harvey’s temporary impact on energy, increases in other areas – particularly services – support our broader outlook for CPI to return to 2% YoY
  • TIPS returns lagged their nominal counterparts by 25bps in August but have already outperformed by 50bps MTD in September, pricing in much of the good news in the August CPI print ahead of time
  • The FOMC will focus on balance sheet reduction at their September meeting, but a December hike is very much on the table, particularly if inflation matches our outlook in the coming months
  • The global economic backdrop continues to be supportive, with firm PMI prints pointing to ongoing manufacturing strength and reduced downside risks

September 2017: Fed Slims Down

  • The Fed will soon begin it's balance sheet reduction.
  • We believe mortgage backed securities are at risk from the tapering.

 August 2017 Inflation Dashboard - Global Inflation: Improvement

  • Despite 4 weaker-than-expected US CPI prints, TIPS outperformed their nominal counterparts by 24bps in July. Global linkers have also begun to perform in recent weeks, with exposure to FX enhancing returns this year.
  • TIPS were supported by a rebound in oil and commodities, as well as by a dovish turn by the Fed
  • The global economic backdrop continues to be supportive, with firm PMI prints pointing to manufacturing strength and reduced downside risks
  • EM continues to perform well, supported by the combination of firmer commodities and a softer dollar, along with a slightly less hawkish Fed.

July 2017 Inflation Dashboard: Fronts Collide

  • Three weak CPI prints, rising oil volatility, a Fed bent on removing monetary accommodation, and diminished hopes for fiscal and regulatory salvation combined in a perfect storm for TIPS breakevens in Q2
  • TIPS have bounced back in the last couple of weeks, led by oil and yet another strong TIPS auction
  • The global economic backdrop has been more supportive, with strong PMI prints pointing to continued manufacturing strength and reduced downside risks
  • But there too, falling energy prices and global central bank hawkishness have weighed on developed market linkers
  • EM continues to perform well and we’d argue that the sector provides a global disinflationary hedge in addition to the more commonly attributed benefits of diversification and commodity exposure
  • We conclude with an expanded section of charts looking at some of the trends and developments in the inflation data and market positioning

June 2017 Inflation Dashboard: Patience Challenged as Risks Mount

  • The strengthening global economy continues to take a back seat to rising energy volatility and domestic political risks
  • Oil resumed selling after OPEC and non-OPEC exporters voted to extend production limits
  • Fiscal stimulus and tax and regulatory reform, once upside risks to domestic growth and inflation, have given way to political risk with the Justice Department naming a special counsel to oversee the Russia investigation
  • The Fed is still expected to hike rates again later this month, but the path going forward is increasingly uncertain
  • TIPS valuations remain supportive from a fundamental standpoint as breakevens remain cheap to inflation forecasts

May 2017 Inflation Dashboard: Fundamentals Call for Patience

  • Unpacking the weak March CPI print
  • Energy risks flare up again, but food tailwinds pick up
  • Front end BEIs continue to look fully valued and increased oil volatility warrants caution
  • Intermediate and longer dated BEIs remain compelling

 Looking for the Fat Pitch

  • ‘Fat pitches’ are rare, but the market will occasionally throw smaller, chubby pitches.
  • Major index rule changes cause dislocations.
  • 15% of the investment grade utilities sector dropping out of the index
  • Opportunity to acquire high quality credits at discounts

 April 2017 Inflation Dashboard: Fundamentals vs. Technicals

  • The Trump reflation trade stalled in March as markets await policy progress
  • Energy tailwinds are set to fade, while food tailwinds emerge
    • Front end BEIs look fully valued and increased oil volatility warrants caution
    • Intermediate and longer dated BEIs remain compelling
  • Fund flows have slowed
    • Trump traders are the wild card; look out if they lose faith in the reflation theme


Archived commentaries: