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Thursday, April 2, 2015

The strong dollar reduced exports and low oil prices slashed import figures resulting in a U.S. trade deficit that plunged 17 percent in February to the lowest level since 2009. This much bigger than anticipated drop in the trade deficit will help the first quarter GDP report but, it also illustrates the headwinds companies are facing in order to compete globally. Exports to China alone fell 15 percent. The upcoming earnings season will be interesting as many of the negative implications of low oil and the strong dollar are already impacting corporate bottom lines, while the positive implications of a stronger domestic consumer are taking their own sweet time to work through the economy. Please follow the trade deficit on page 41 of the Voya Global Perspectives™ book.

Wednesday, April 1, 2015

The recent trend of decent, but not so spectacular, economic news continued today with a lower than expected private sector ADP payroll report and a manufacturing report that showed manufacturing expanding but at the lowest rate since last May 2013. The ADP report showed that 189K jobs were added last month. No surprise – large companies showed the weakest growth compared to mid and small, as large companies are more exposed to international markets and hence the headwind caused by a strong dollar. Manufacturing also failed to impress, coming in with and ISM PMI reading of 51.5. Anything over 50 is considered expansion but low oil and the strong dollar are inevitably chipping away at some of the strong manufacturing capital developments that were spawned from the shale energy renaissance we have been enjoying over the last five years. The good news is that the first quarter is behind us and the economy is expected to reaccelerate in the coming quarters. Please follow ISM manufacturing on page 9 of the Voya Global Perspectives™ book.

Tuesday, March 31, 2015

The last day of the quarter started on a negative note after a huge rally yesterday. This has been the story of the quarter – U.S. large cap markets have essentially been treading water. A strong dollar, low oil, downgraded profit expectations, and the ever present speculation over the Fed’s next moves have weighed on markets, paring substantial moves forward. The S&P looks like it will post a modest gain of around 1 percent for the quarter while EAFE, Global REITs and US midcaps will be asset classes in the plus 5 percent club, generously rewarding investors who have embraced global diversification. Additionally, in the first quarter of 2015 sector performance dispersion was the widest in 3 years giving stock pickers and active management a leg up. In fact, over 50 percent of the S&P500 active managers are beating their benchmarks for the first time in years. Please review the correlations among major asset classes on page 70 of the Voya Global Perspectives™ book, noting that combining assets with low correlations offers the best diversification benefits.

Friday, March 27, 2015

One of the biggest concerns this year has been the crashing oil prices wreaking carnage on the energy sector. But, in the last couple of weeks oil prices have increased to above $50 on geopolitical concerns and a weaker U.S. dollar. During these two weeks the energy sector, S&P 500, surged nearly 3.5 percent bringing a needed boost to this decimated sector. Maybe the negative 60 percent earnings growth expected for the first quarter in energy is excessively pessimistic which would bode well for our future outlook. Corporate earnings in this bull market have shown astounding resilience and this time may be no different. Meanwhile, 4th quarter 2014 GDP – 3rd revision – stayed at 2.2 percent but, the consumer seems to be benefiting from these low oil prices which is another positive offset for this quarter’s coming earnings season. Please see “Oil Price & Intensity” on page 66 of the Voya Global Perspectives™ book.

Thursday, March 26, 2015

Geopolitical risks are hard to quantify because they are always part of the global landscape. However, the most recent conflict in Yemen and concerns of supply disruptions immediately sent the price of oil above $50/barrel. Yemen is not a huge producer of oil but any unanticipated conflict in the middle east affects U.S. markets because, despite ramped up production of domestic oil, the U.S. is still a net importer of oil. Most likely the surge will be short lived. Gold prices have also risen as a result of the turmoil. Before investors flock to gold as a safe haven from market swings they should note that it is barely up 1.7 percent this year and was down 4.5 percent last year and down 28 percent the year before as market predictions of economic doom and the dollar’s collapse never materialized. Please follow the price of gold, as well as the real inflation adjusted price of gold, on page 53 of the Voya Global Perspectives™ book.

Wednesday, March 25, 2015

In the 2015 Global Perspectives Forecast we noted that, "Global M&A was moribund for years after the Great Financial Crisis, but all that changed in 2014. We expect the trend to continue in 2015 and eclipse the 2007 record for deal volume." Sure enough Q1 2015’s $882 billion in deals is quickly approaching an all-time deal volume high as companies are finding attractive prospects to add value and boost growth. M&A activity is a catalyst for markets. Investors parked in cash, frightened by (normal) market volatility, are locking in an after inflation losing rate of return and missing potential opportunities. The latest merger deal sent one of the company’s stock price soaring 37 percent in one day. That’s a lot of macaroni and cheese. Please review the Voya Global Perspectives® 2015 Forecast.

Tuesday, March 24, 2015

The violent rise in the dollar has snapped back to “normal,” or what it was on average in the 15-year period ending in 2001. The Euro’s precipitous fall has been back to “normal,” or near where it was issued in 1999. The world is shocked, simply shocked, by the collapse in oil prices to back to – yes, you guessed right – “normal,” or the average price for the past 30 years. What is not normal are the low rates and low inflation, although we got a positive reading on CPI this morning. What is also not normal is the surprisingly low volatility, closer to single digits than its normal 20-handle. But the Fed is moving ever closer to normalizing rates and this will likely normalize volatility as well . The only wailing and gnashing of teeth is by the media that is struggling to make a story out of normal. The markets will continue to normalize and this likely means higher volatility but a more sanguine and sustainable economic backdrop. Please see Voya Global Perspectives® pages 48, 66 and 25 for currencies, oil prices, and volatility, respectively.

Wednesday, March 18, 2015

All eyes are on the Fed announcement today at 2 p.m. EDT. We forecast that the word "patient" gets removed, which is hawkish, but will be balanced by dovish outlook on the path of rates. Fed Chair Yellen has demonstrated her market savvy since she was appointed Fed Chair and this will be no different. Those expecting a "Fed Policy Mistake" will miss out on this bull market run that shows no signs of abating. Please see the Voya Global Perspectives ™ latest monthly commentary on the dangers of market whipsaw and "gaming diversification."

Tuesday, March 17, 2015

Will they or won’t they? This week is all about the Fed and whether or not they will remove the patient language from the forward guidance policy regarding interest rates during Wednesday’s FOMC statement. Consensus is that the Fed is impatient with the patient language and it will be eliminated despite the surging dollar and below target inflation. However, this does not mean that a June lift off is certain. What is certain is that investors should be prepared for market volatility. Please follow the VIX as a measure of market volatility on page 25 of the Voya Global Perspectives™ book.

Friday, March 13, 2015

In February domestic equity markets staged an astounding reversal from January, bringing major indexes well into positive territory for the year and whipsawing many who sold into the softness. In March markets reversed course and most major U.S. indices are now posting negative returns so far this month. So January was down and investors got scared and sold.  February was up big and investors who missed out bought.  Now March is down. What do you think investors will do?  Hmm, I think you get the drift and this doesn’t sound like the best-laid plan.  Meanwhile, international markets have continued to outperform, suggesting to us that 2015 might be particularly painful for those blind to the “folly of gaming diversification.”   Please see the latest Global Perspectives Monthly Commentary, “Market Whipsaw Sheared Bears Like Sheep in February”.


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