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A bond’s-eye view of the world

Speaker:
Rob Neithart
Title:
Portfolio manager/investment analyst
Based in:
Los Angeles
Investment experience:
24

ROB NEITHART: It’s a mixed environment, and I’m very concerned about how things are going to play out in Europe. We’re going on Year 4. When this began to bubble up around Greece, very few suspected that it would still be lingering with us four years later. Most analysts thought that it would be dealt with, because the rational-person argument — which constantly fails — would have been “They’re going to fix it because it’s in their self-interest to fix it; it’s within their capability to fix it.” They haven’t fixed it, and that’s because there are some very significant political constraints on taking the action that’s necessary. The ways in which this can unravel are very destabilizing, and that’s being priced into risks in Europe.

But it’s offset with a lot of very significant positive developments elsewhere: corporate credit, the financial health of many governments in what we used to refer to as the emerging markets and conditions here in the U.S. We haven’t had a spectacular recovery; it’s been tepid. [There are] very good reasons for that: the need to deleverage and risk-aversion. But fundamentally, I think, the U.S. is a relatively healthy place that has sound, good, long-term fundamentals — major fiscal challenges, but it does benefit from having a very competitively valued currency. The housing market is beginning to stabilize, and that can be an important contributor. And we have very, very favorable demographics in the U.S. relative to other developed countries.

So I want to retain exposure in my portfolios to those developments, despite the uncertainty around the election outcome and where we’re going with budget policy. I do see things as much more glass-half-full here.


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