The Knowledge Center is your source for perspectives on industry challenges and opportunities affecting you and your clients. Below are materials from SEI's Investment Management Unit. For industry-specific thought leadership, please visit the following sections:
William T. Lawrence
Managing Director, Global Fixed Income Investment Strategy, Investment Management Unit
Video: Q3 2014 Global Economic Market ReviewOct172014Article
Concerns about the magnitude and timing of an interest rate hike in the U.S. combined with geopolitics and global growth concerns to push market volatility higher.
Keeping Market Volatility in PerspectiveOct162014Article
Recent weeks have been challenging for investors, as economic uncertainty and a steady flow of negative news headlines have caused volatility and anxiety to rise considerably. SEI believes it is important for long-term investors to be patient when faced with panic-inducing headlines. If investment time horizons are measured in years, it does no good to worry about day-to-day reports of doom and gloom. As today’s global crises run their course, we believe an investor’s best defenses include a level head and a diversified portfolio.
Volatility is Back, as ExpectedOct152014Article
Volatility has picked up and markets have fallen of late, driven by investors’ concerns about global growth. Looked at in isolation, recent events seem disconcerting; however, a longer-term view provides helpful context. If the current stock market correction has further to go, we would start to view it opportunistically.
Video: Third Quarter 2014 Market UpdateOct152014Article
Sean Simko recaps the third quarter and the intense discussions around a shift in Federal Reserve policy.
Quarterly Market Commentary - Third Quarter 2014Oct92014Article
Geopolitical developments and the impending reduction of central bank accommodation in major economies coincided with a slowing of growth during the quarter.
A New Chapter Begins - Economic Outlook Third Quarter 2014Oct62014Article
Tax Collections Across StatesOct12014Article
In this commentary, discussion of a recent report from the Rockefeller Institute of Government and how municipal debt investors should approach this type of data.
September 2014 Federal Open Market CommitteeSep252014Article
Here in the U.S., investors were watching this month's FOMC meeting for the possible removal of the language “considerable time” from the Fed’s recent post-meeting statement. Such an omission would suggest that interest-rate hikes will take place sooner than later.
Behavioral Finance: Loss and Regret AversionSep252014Article
Here we address loss aversion—a behavioral phenomenon central to the development of Kahneman and Tversky’s Prospect Theory—and regret aversion, which drives investors to make inferior decisions through passive behavior
Central Bank Policy Shifts Highlight Diverging Bond YieldsSep122014Article
After half a decade of tepid economic recovery marked by low and generally falling bond yields, we are finally seeing some divergence.
Monthly Market Commentary - August 2014Sep92014Article
Economic expansion continued to unfold at disparate paces across developed markets. New data showed signs of shifting growth trajectories, putting pressure on central banks to modify current levels of accommodation. Fixed-income and equity markets fared better in August than during the prior month. Corporate bonds led other fixed-income segments and the Americas outpaced other regions for equity performance. Even with somewhat elevated developed-market equity valuations and narrow credit spreads, we see room for markets to move higher and would be inclined to buy on a correction.
Investment Fundamentals: Tax-Loss HarvestingSep32014Article
Tax-loss harvesting is the process of selling a security at a lower price than initially purchased to offset taxable gains. Effective execution of a tax-loss harvesting strategy can increase the after-tax value of an investor’s portfolio. The wash-sale rule prohibits re-purchasing the same security, or one that is substantially identical, within 30 days of
sale for the purpose of realizing a capital loss.
The Promise (and Perils) of Frontier MarketsSep32014Article
Frontier markets are likely to play an increasingly important role in global equity markets in the years ahead. Frontier-based companies enjoy access to some of the world’s fastest growing economies and populations. We believe actively managed frontier-market exposure can benefit patient, long-term investors.
Second Quarter 2014 Market and Performance UpdateJul102014Article
Uneven worldwide economic growth has resulted in global monetary policy at various stages of ebb and flow. Global inflation pressures may begin to weigh on accommodative central banking. Most developed-market equities continue to see earnings growth. A turnaround in Europe is one of the keys to global market performance in the months ahead.
Economic Outlook: And the Music Plays OnJul72014Article
Equity markets are sitting at record highs and bond markets continue to defy gravity. The big question should be obvious: how much longer can it last?
While developed market equity valuations are somewhat elevated and credit spreads narrow, we think it’s premature to adopt a strongly defensive investment stance. The global economy continues its slow recovery process, and there has rarely been a time when the world’s central banks have been as active in their efforts to support economic recovery and growth as they are presently.
Japan: Value Trap or OpportunityJul22014Article
Japanese equity markets have stalled following a strong rally in 2013. The short-term outlook for Japanese equities is generally positive, but faces challenges. We are optimistic on the long-term prospects for Japan and are evaluating the opportunities.
May 2014 Monthly Market CommentaryJun62014Article
Economic growth showed measured improvement globally, and inflation remained below target in most regions. Most major bond markets—U.S., U.K., Japan and the eurozone—saw government bond yields fall, while global equity markets were again positive. While not as robust early in 2014 as they were last year, we believe equities have held up quite well in the face of political tensions and emerging-market growth concerns.
April 2014 Monthly Market CommentaryMay72014Article
Economic growth remains mixed across the globe, and inflation was tame in most regions. Most major bond markets—U.S., U.K., Japan and the eurozone—experienced a modest decrease in government bond yields. Global equity markets showed impressive resiliency and were again positive. While global equity markets have not been as robust early in 2014 as they were last year, we believe they have held up quite well in the face of political tensions and emerging-market growth concerns.
First Quarter 2014 Market and Performance UpdateApr82014Article
Optimism continued in advanced economies, while emerging economies faced multiple challenges. Easing of inflation pressures around the world should keep global monetary policies accommodative. Global equities reached positive territory by quarter end, while fixed income gained as interest rates generally fell.
An Economic Thaw, but a New Cold WarApr22014Article
Global stock markets bounced higher following a brief dip in the latter part of January, with the U.S. leading the way. The ability of equities to quickly overcome periodic stumbles (in the U.S. and other developed markets, at least) underscores investors’ willingness to assume risk even when economic and geopolitical uncertainties are on the rise. The fact that developed market equity pullbacks remain brief and shallow suggests that the rotation out of cash and fixed-income assets and into stocks is still very much in play.
February 2014 Market and Performance UpdateMar62014Article
Economic data remained mixed in the U.S., despite some positive forward-looking indicators. Ongoing strength was seen in the U.K. and Japan, along with pockets of both resilience and weakness in Europe. Global bond yields were generally steady in the month following a resetting of levels in January. Global equity markets strongly rebounded as investor optimism was particularly strong across European markets. With positive economic growth in Europe and solid earnings reports from U.S. companies, there is plenty of optimism that 2014 will be a decent year.
January 2014 Market and Performance UpdateFeb72014Article
The monetary policies of global central banks remain accommodative and are expected to continue as such, while global growth builds momentum. Concerns related to the U.S. Federal Reserve tapering of bond purchases, sustainability of corporate profits and Chinese output resulted in a pullback in global equities, while global fixed income gained. SEI does not believe the elements of a more serious equity bear market are in place. The most important drivers of stock-market performance in our framework are still flashing neutral-to-positive signals.
Concerns surrounding the pace of Chinese growth, the impact of reduced quantitative-easing stimulus and the health of corporate earnings culminated in a sudden shift of investor sentiment last week. SEI is maintaining its favorable view of emerging equities, as we believe catalysts will materialize that should improve the outlook for the asset class. While emerging and developed equities have struggled out of the gate in 2014, we do not believe the elements of a more serious equity bear market are in place.
November 2013 Market and Performance UpdateDec62013Article
Accommodative monetary policies by most global central banks remain in place, with the European Central Bank taking additional steps to aid the eurozone’s recovery. Global fixed-income markets dipped, with emerging-market debt retreating much more than investment-grade bonds. Global equities generally gained, led by the traditional growth sectors of health care, information technology and consumer discretionary.
Risk Parity: The ConceptSep122013Article
“Risk parity”—the concept of achieving diversification by sources of risk—is gaining wider attention. While there are numerous risks involved with investing, “risk,” as we refer to it in this paper, means volatility or standard deviation; it does not specifically encompass other sources of investment risk.
Commentary: A Brief History of US Economic Crises: 1929 - PresentDec102008Article
While no two economic crises have been alike, one factor that they share is that they have all ultimately ushered in a new age of economic growth and prosperity of varying length—hopefully with many lessons learned.
Q314 Market UpdateArticle