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Spotlight

Wealth Inequality—A Tale of the Diverging Tails

Nathan Sheets, PhD, Chief Economist, Head of Global Macroeconomic Research, and George Jiranek, Associate, Global Macroeconomic Research

The issue of increased wealth inequality has accompanied the recovery in U.S. household balance sheets to the point where the Top 10% of U.S. households now hold 70% of the wealth, while the Bottom 90% account for just 30%. This paper examines the underlying drivers of the widening wealth distribution and its potential economic effects. The policy prescriptions to narrow wealth inequality include approaches that will work more slowly than measures to directly restrain accumulation at the top, such as a wealth tax, but they will also have far fewer unintended consequences.

Capturing the Opportunity of Constraints

Gregory Peters, Managing Director, Head of Multi-Sector and Strategy, and Tom McCartan, FIA, CFA, Vice President, Liability-Driven Strategies

Fixed income markets contain a high proportion of investors whose goal of identifying the most attractive relative value is subverted by jurisdictional or self-imposed rules, regulations, and constraints, or is superseded by other non-economic objectives, such as accounting conventions. This, in turn, creates opportunities for total return, multi-sector fixed income investors willing to consider broad investment guidelines and greater degrees of portfolio management freedom. In this paper, we lay out: 1) The fixed income market segmentation we observe and the resultant high dispersion in risk-adjusted reward; 2) Principles for identifying relative value and pitfalls to avoid; 3) An outline of our portfolio construction approach for building multi-sector portfolios.

Recent Thought Leadership

India—Ready to Step into China’s Shoes?

Gerwin Bell, PhD, Lead Economist, Asia, Global Macroeconomic Research

India may be well placed to replicate China’s rise over the last three decades but the chance of success rests on India being able to drastically increase domestic savings and economy-wide productivity. The current situation, with China losing cost competitiveness and being in the crosshairs of a trade conflict, offers an opening for India. It is now important for India to focus on essential reforms and its vision to shift to an investment- and export-led growth model.

The Potential Implications of Investing in Coal-Heavy Utilities

Peter Cody, CFA , Principal, U.S. Investment Grade Credit Research, and Tatiana Spineanu, CFA, Principal, European Investment Grade Credit Research

Several factors—including evolving regulations, shifting dynamics across commodity markets, declining costs of renewable electrical generation, and mounting environmental concerns—continue to affect the economics of coal-fueled electrical generation. With these factors in mind, this paper addresses a primary investment-related question: Do (or will) utility bonds issued by more coal-heavy or carbon-intensive utilities trade at a discount? Or stated differently, what are the implications from the relationship between bonds issued by coal-heavy utilities and those issued by utilities with less reliance on coal

Weekly View: Shifting Oil Market Dynamics; A Driver of the Rate Selloff

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