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Investment Insights

INVESTMENT INSIGHTS  |  February 2018

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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INVESTMENT INSIGHTS  | 
February 2018
 |  FEATURING Timothy D. Armour & Will McKenna

Capital Group Chairman 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.

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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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INVESTMENT INSIGHTS  |  January 2018

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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INVESTMENT INSIGHTS  | 
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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INVESTMENT INSIGHTS  | 
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.

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INVESTMENT INSIGHTS  |  December 2016

The Fed Raises Rates, With an Eye on Inflation

A year after the Federal Reserve boosted the key interest rate for the first time in nearly a decade, it has finally raised it again. The move is an indicator of the central bank’s confidence in the health of the U.S. economy. Specifically, it signals that Fed officials believe the labor market and inflation are on the right track. 

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Low bond yields have sent investors piling into higher yielding sectors like utilities, stretching the valuations of many high-dividend-paying stocks. How should dividend-oriented investors navigate this environment of lofty valuations and low yields? Alan Berro, Principal Investment Officer of Washington Mutual Investors Fund℠, gives his perspective on addressing this conundrum. In this Q&A, he discusses:

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Defined benefit (DB) plans consistently report better returns — as much as 0.9% higher per year1 — than defined contribution (DC) plans. The Pension Protection Act gave plan sponsors tools to narrow this gap, such as investment re-enrollment and target date funds (TDFs) as default investments. These have helped improve investing behavior for many participants, but what about the 63% of DC plan participants who still make their own investment decisions?2

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INVESTMENT INSIGHTS  |  November 2016

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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INVESTMENT INSIGHTS  |  October 2016

The Long View: The Changing Face of the Global Consumer

Consumer spending, long a driver of the global economy, is undergoing sweeping change. Whether it’s housing for millennials or health care for baby boomers, a significant shift in the way people spend money is underway in both advanced economies and the developing world.

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INVESTMENT INSIGHTS  |  September 2016  |  FEATURING Margaret H. Steinbach , Mike Gitlin & David A. Hoag

Is Aggressive Central Bank Intervention Working?

Quantitative Easing on Turbocharge in Major Economies

In response to the global financial crisis and the muted growth that persists years later, central banks across the globe have aggressively expanded their balance sheets using a range of both traditional and unconventional policy tools. As of the end of June, the combined balance sheets of the U.S. Federal Reserve, European Central Bank and Bank of  Japan totaled over $12.1 trillion — a  283% increase since June 2007. Never before have the balance sheets of the central banks of these major economies  been so inflated.

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INVESTMENT INSIGHTS  |  September 2016  |  FEATURING Margaret H. Steinbach , Mike Gitlin & David A. Hoag

How to Invest in the Post-Post-Crisis

U.S. Economy: Not an Environment for Aggressive Monetary Policy Tightening

It’s been said, and feared, for years that U.S. interest rates will quickly rise once the Federal Reserve starts to reverse course, resulting in declines in the prices of fixed income securities. Since the infamous “Taper Tantrum” in mid-2013, the Federal Reserve has been carefully trying to step away from the unprecedented easy money policy it has employed since the financial crisis. Yet, the power of the U.S. to  act in isolation has diminished over the past decade.

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INVESTMENT INSIGHTS  |  July 2016

Are the American Funds Exposed to Brexit?

International Funds Have the Highest Concentration of Investments in European Companies.

The U.K.’s June 23 vote to leave the European Union surprised many investors, triggering one of the steepest two-day selloffs for global equities in history. While markets have since recovered much of those losses, volatility will likely persist as the short- and long-term impact of Brexit on the U.K. and the rest of Europe remains unclear. The uncertainty has driven government bond yields to record lows and the U.S. dollar to a three-decade high against the British pound.

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INVESTMENT INSIGHTS  | 
July 2016
 |  FEATURING Matt Miller , Mark A. Brett & Jens Søndergaard

Brexit’s Fallout: Could a Shock to the System Be a Good Thing?

Capital Group portfolio manager Mark Brett and economist Jens Søndergaard, both based in London, discuss possible implications of the Brexit vote for the U.K., the European Union and investors.

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INVESTMENT INSIGHTS  |  June 2016  |  FEATURING Robert H. Neithart

Uncovering Value in Emerging Markets Bonds Amid Political Change and Uneven Growth

Emerging markets bonds have notched big gains in 2016, despite political turmoil and economic setbacks. Though it is difficult to definitively say that the market has turned for the better, portfolio manager Rob Neithart says there are good reasons for investors to feel positive. The yield advantage of emerging markets over developed markets is hard to ignore, and in some cases valuations are as attractive as they’ve been in years.

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INVESTMENT INSIGHTS  | 
February 2016
 |  FEATURING Joanna F. Jonsson

Insights From a Morningstar® Award-Winning Manager

American Funds portfolio manager Jody Jonsson discusses the objectives of New Perspective Fund®, whose portfolio management team was recently named Morningstar’s International Stock Fund Manager of the Year. She also shares keys to the fund’s recent and long-term success.

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INVESTMENT INSIGHTS  |  February 2016  |  FEATURING Mark A. Brett

The Dollar’s Ascent Could Be in Its Final Phase

Summary

  • The U.S. dollar’s five-year-long bull run may be coming to an end, particularly relative to major currencies such as the euro and the yen.
  • The headwind of a strong dollar should diminish for global and international stock portfolios.
  • Interest rate differentials and exchange rates do not always move in lockstep, so the Federal Reserve’s rate decisions won’t necessarily dictate what’s next for the dollar.
  • China’s apparent commitment to continue to devalue its currency is expected to cast a shadow over currencies in Asia and several other emerging markets.
  • As emerging economies adjust to weaker global industrial activity and Chinese growth that is slower and less commodity-intensive, some currencies may continue to weaken — but there are bright spots.

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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 fund prospectuses and summary prospectuses or the collective investment trust's Characteristics statement, which can be obtained from a financial professional, Capital or your relationship manager, and should be read carefully before investing. 

The return of principal for bond funds and for funds with significant underlying bond holdings is not guaranteed. Fund shares 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. 

Bond ratings, which typically range from AAA/Aaa (highest) to D (lowest), are assigned by credit rating agencies such as Standard & Poor's, Moody's and/or Fitch, as an indication of an issuer's creditworthiness.

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

Standard & Poor's 500 Composite Index is a market capitalization-weighted index based on the average weighted results of approximately 500 widely held common stocks.

The Capital Group companies manage equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and not to be comprehensive or to provide advice. 

©2018 Morningstar, Inc. All Rights Reserved. Except for Lipper rating information, the information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar, its content providers nor the American Funds are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. Information is calculated by Morningstar. Due to differing calculation methods, the figures shown here may differ from those calculated by American Funds.

Past results are not predictive of results in future periods.