Investment Insights | Capital Group

Investment Insights

INVESTMENT INSIGHTS  |  August 2019  |  FEATURING Greg Garrett

Long duration credit update for the second quarter of 2019

Central banks continued to play a pivotal role in guiding investor sentiment during the second quarter. Signs of slowing growth, increased market volatility and trade tensions were enough to convince them that potential downside risks warranted a response. At its June meeting, the U.S. Federal Reserve clearly articulated the potential for policy rate cuts in the second half of 2019. The European Central Bank and the Bank of Japan conveyed similar messages. This shift improved investor sentiment and drove credit spreads lower; they finished the quarter slightly below where they began.

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INVESTMENT INSIGHTS  |  July 2019  |  FEATURING Colyar Pridgen

Charting the LDI opportunity set

Since the early years of liability-driven investing (LDI), many defined benefit (DB) pension plan sponsors have cast a wide net for investments to reap higher returns and hedge long-term plan liabilities. While this has led some sponsors toward ever more creative and less traditional avenues to access long duration, the core hedging assets in most LDI programs remain investment-grade government and credit bonds, often weighted toward the long end (maturities of 10 years or more).

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One of the world’s biggest stock markets is opening up to foreign investors. Hundreds of mainland Chinese companies, known as A shares, are being added to the benchmark MSCI Emerging Markets Index, a step toward further integrating China’s US$8 trillion stock market into global financial markets.

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Long duration credit update for the first quarter of 2019

After a significant widening of spreads in the fourth quarter, credit markets rebounded along with equities and other risk assets during the first quarter. A key catalyst of positive sentiment was a more accommodative stance from the U.S. Federal Reserve. This drove U.S. Treasury yields lower across the yield curve and pushed the 10-year Treasury rate below the fed funds rate – a condition that has preceded each of the last three recessions by one to three years. Long-dated investment-grade credit spreads narrowed by 27 basis points (bps) to 173bps during the quarter. The spread tightening combined with lower Treasury yields cut the long corporate credit yield to 4.41% from 4.91%.

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INVESTMENT INSIGHTS  |  February 2019  |  FEATURING Greg Garrett

Long duration credit update for the fourth quarter of 2018

Global economic momentum decelerated in the fourth quarter. An inversion of two- and five-year yields and shifting growth expectations contributed to significant stock market volatility and wider credit spreads. Long duration investment-grade corporate bond spreads widened 47 basis points to 200bp, mostly due to falling U.S. Treasury yields.

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INVESTMENT INSIGHTS  |  September 2018

Getting equity right in the target date distribution phase

Should a 65-year-old investor have the same equity portfolio as a 25-year-old? Most people would say no. But, surprisingly, this is the case for some target date series (including some passive ones).

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INVESTMENT INSIGHTS  |  July 2018  |  FEATURING Gary Veerman & Chris Anast, CFA

Three fundamental pension risk management questions all plan sponsors should ask.

Plan sponsors have many factors to consider when making prudent pension risk management decisions. Equity results, interest rate movements, glide path development, Pension Benefit Guaranty Corporation premiums, contribution policy, company-specific risk tolerance, actuarial assumption changes — the list goes on.

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U.S. Tax Reform: Six Key Takeaways

Sources: Capital Group estimates

This article was originally published on Dec. 20, 2017, and has been updated to reflect the bill's passage into law.

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INVESTMENT INSIGHTS  |  February 2018  |  FEATURING Mike Gitlin

Renewed Volatility Means It’s Time to Refocus on Fixed Income.

Key Takeaways

Mike Gitlin, head of fixed income at Capital Group, has 24 years of investment industry experience. He discusses the current market environment and what it means for bond investors.

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February 2018
 |  FEATURING Timothy D. Armour & Will McKenna

Capital Group's Tim Armour Addresses Market Volatility

Capital Group chairman and chief executive officer Tim Armour discusses the sudden return of volatility to the markets and provides helpful context for advisors and investors.

Watch Video (15:03)

INVESTMENT INSIGHTS  |  February 2018  |  FEATURING Timothy D. Armour

The Return of Market Volatility Is Expected and Healthy

Stocks have declined in recent days amid investor concerns about higher inflation and rising interest rates. In this interview, Capital Group Chairman and CEO Tim Armour discusses the drivers of this sudden downturn and his long-term outlook for the financial markets.

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INVESTMENT INSIGHTS  |  February 2018  |  FEATURING Jared Franz

Stocks Pull Back Amid Signs of Rising Rates and Higher Inflation

The equity market lost more than 8% in a few weeks’ time. This decline to the S&P 500 Composite Index, which began in late January, is the first of its kind since 2016. This volatility comes as investors come to terms with a new economic and investment environment of higher interest rates and rising inflation.

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2018 Outlook: It’s Time for Balance and Flexibility

Despite the concerns surrounding financial markets, 2017 produced healthy returns. What will 2018 hold in store? In our 2018 Outlook, we give our perspective, including:

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July 2017
 |  FEATURING Greg Garrett

As Rates Rise, Keep Your Eyes on the LDI Prize

When will the Federal Reserve make its next move, and how high could rates go? These questions can seem like the only ones that matter in a hiking cycle. Plan sponsors, however, need to think differently. In an Asset TV “LDI Masterclass,” panelist Greg Garrett makes the case for looking at scenarios — and considering the possible impact on plan funded status.

Watch the full Masterclass video on Asset TV

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March 2017
 |  FEATURING Will McKenna & Michael T. Kerr

A Glimpse Inside The Growth Fund of America’s Portfolio

Mike Kerr, a principal investment officer of The Growth Fund of America®, shares his thinking on industries and companies currently held in the fund, including technology, entertainment and health care.

Watch Video (16:50)


Reflecting Plan Sponsor Risk Tolerance in Glide Path Design

Synchronize your risk tolerance and LDI glide path
  • What is the optimal way for a defined benefit plan to de-risk? This is one of the most challenging questions faced by plan sponsors.
  • To answer appropriately, a sponsor must first consider their risk tolerance and the objective factors influencing it — including the plan’s relative size, whether it’s open or closed, and business cyclicality.

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Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the mutual fund prospectuses and summary prospectuses, which can be obtained from a financial professional, and should be read carefully before investing. Similar information about collective investment trusts can be obtained from Capital Group or participants’ plan provider or employer. 

The return of principal for bond portfolios and for portfolios with significant underlying bond holdings is not guaranteed. Investments are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings. Lower rated bonds are subject to greater fluctuations in value and risk of loss of income and principal than higher rated bonds. 

Investing outside the United States involves risks, such as currency fluctuations, periods of illiquidity and price volatility. These risks may be heightened in connection with investments in developing countries. 

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