As the chart above shows, flows into emerging markets funds remained positive but diminished considerably from July and August.
Negative bond yields in Japan and the Eurozone, coupled with very low federal funds rates in the United States, are part of why emerging market bonds and currencies have performed so well in 2016.
In the current market environment, duration risk has risen across bond markets (BND) (LQD). When interest rates rise, bonds with a higher duration will likely be affected more.
All countries have suffered from yield increases, and monetary policy is turning less accommodative, even in Japan and the European Union.
The relationship between the CBOE Volatility Index (or VIX) and the spread between high-yield bonds over ten-year Treasuries is highly correlated.
The CBOE Volatility Index (or VIX), a measure of market turbulence, tumbled 12% during the week ended September 3, 2016. It was the biggest fall in two months.
Led by improvements in production-related indicators, the Chicago Fed National Activity Index (or CFNAI) rose to +0.27 in July from +0.05 in June.
The global hunt for returns has turned US junk bonds into an attractive investment option.
Amazon and Microsoft are positioned as leaders in Gartner’s Magic Quadrant. Google is positioned as a visionary, but Rackspace is considered a niche player.
The Financial Select Sector SPDR Fund (XLF) was hit the worst last week. The Fed kept interest rates unchanged. There were concerns about the “Brexit.”
Analysts’ estimates indicate upside potential of 23% for Citigroup from its closing price of $42.48 on June 17 for the next 12-month period.
While most subgroups within the financial sector generated negative returns last week, banks and diversified financial services stocks were impacted the most.
Large-cap stocks above $10 billion make up 87.3% of the Financial Select Sector SPDR Fund (XLF). These stocks lost 4.4% in the past year and 1% last week.
US stock markets closed last week in red. The Fed kept rates unchanged and concerns regarding a potential “Brexit” weighed in on global markets.
This week, investors in banking stocks are watching for the results of the Fed’s 2016 stress test. Favorable results might bring some optimism to the sector.
Generally, banking stocks (XLF) trade between 1x and 2x their book values. Stocks trading lower than their book values attract investor attention.
Oppenheimer and Barclays (BCS) gave one-year price targets of $243 and $210. They’re the most bullish on Goldman Sachs.
J.P. Morgan’s 1Q16 earnings beat investor’s expectations. Loan growth and credit quality improved despite weakness from the investment banking business.
Wells Fargo has a consensus target price of $54.81 for the next 12-month period. This implies a return potential of 17%.
In a Bloomberg survey of 32 analysts, 26 analysts assigned a “buy” rating to Citigroup. Six analysts rated it as a “hold.” It didn’t receive any “sell” ratings.