NEW YORK--(BUSINESS WIRE)--Wall Street Webcasting has prepared and provided for you an exclusive broadcast of Wells Fargo Securities own, Rich Gordon. Gordon is highly recognized for his weekly narrates regarding the fixed income strategy at Wells Fargo Securities (NYSE:WFC). This week, Gordon concentrates on the manner in which investors have begun placing their bets on portfolio performance.
Fixed income investors are usually faced with a fork in the road where they have to decide on either overweight or underweight duration, convexity, curve shape, and credit spread exposures. The duration decision generally has the greatest impact on overall portfolio performance. It is crucial for investors to get an accurate figure of the direction of interest rates for the first half of the year, or else they’ll be taking outsized risks during the second half of the year in order to try and catch-up.
Recently, a survey performed by 50 economic analysts showed that 100% of them predict higher long-term treasury yields in 2015. Our economists here at Wells Fargo believe them to be wrong. We believe there will be a further rally in long term treasury yields, and a continued flattening to the shape of the curve as well during 2015. Economic growth in other parts of the world is trending lower. While growth in the U.S. perseveres in its improvement, the rest of the world hasn’t had such luck.
The decrease in oil prices can increase global macro risks and financial instability. Prices have taken a drop of 57% peak to trough since last summer’s high. It fell more during the financial crisis and financial recession; almost 75% peak to trough. A more suitable event may have been when oil prices dropped almost 56% in 1997 and 1998. This effected countries who were highly dependent on oil exports for their sovereign cash flow, in particular, Russia.
We’ve turned much attention to the Russian stock market recently. It has hardly budged throughout the downward price adjustment in oil. This seems to be ironic because the MICEX Index took a plunge of almost 80% during the 1997-1998 price decline in oil, and fell just under 70% during the 2008 financial crisis. Russian currency has depreciated in value by almost 50% during 2015.
To hear a more in depth explanation of recent economic data, both domestically and internationally, please tune into The Wells Fargo Securities latest video.
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