WHITE PAPERS

WHITE PAPERS

The Next Chapter in the U.S.-China Trade War

The Next Chapter in the U.S.-China Trade War
PGIM Fixed Income  PDF Opens in a new window

With President Trump and President Xi agreeing to restart trade negotiations, PGIM Fixed Income's baseline remains that they both face compelling incentives to resolve the conflict. Trump needs a strong economy and a rising stock market leading up to the presidential election in November 2020. Xi has the dual objectives of hitting his 6.0-6.5% growth target and avoiding further accumulation of debt and leverage in the economy. An escalation of the trade war, or even a continuation through early next year, would be inconsistent with these objectives. Given this backdrop, PGIM Fixed Income sees four scenarios as to how the trade talks might proceed over the next year.

Letters from Kyiv

Letters from Kyiv
PGIM Fixed Income    PDF Opens in a new window

In his recent trip to Kyiv, Ukraine, PGIM Fixed Income’s Giancarlo Perasso’s priorities were threefold:

  • Confirm the political outlook given the country’s new president, upcoming parliamentary elections, and process of forming a new government;
  • Assess the status of Ukraine’s IMF program, financing needs, and efforts for structural reform;
  • Evaluate the fallout, particularly for the National Bank of Ukraine, from the ruling that invalidated the nationalization of PrivatBank, the country’s largest private bank.

Perasso’s findings from the trip reinforced our positioning views on Ukraine’s hard currency sovereign debt.

Uncovering Alpha Opportunities in Emerging Market Corporates

Uncovering Alpha Opportunities in Emerging Market Corporates
PGIM Fixed Income   PDF Opens in a new window

This paper by PGIM Fixed Income touches upon the market opportunity across EM corporates and follows with examples of how global investors with in-depth knowledge of local business practices, politics, and corporate culture can take advantage of the idiosyncratic opportunities presented by EM corporate bonds.

The Fed Clears the Way for Cuts as the Market Seeks Even More

The Fed Clears the Way for Cuts as the Market Seeks Even More
PGIM Fixed Income  PDF Opens in a new window

In its dovish tilt this week, the Fed created more optionality for itself, clearing the way for possible rate cuts in the second half of this year if incoming data indicate that economic growth is at risk of downshifting and prospects for a pickup of inflation towards 2% are fading. Our base case now expects two rate cuts in the second half of 2019—more than what the median Fed projection has penciled in, but less than the three cuts the market has been pricing in. We also look at what may be contributing to market expectations for even deeper cuts going forward and how this could affect bond market conditions going forward.

An Overdue Recalibration of the Credit Ratings for Mexico and Pemex

An Overdue Recalibration of the Credit Ratings for Mexico and Pemex
PGIM Fixed Income   PDF Opens in a new window

Long before the threat of U.S. tariffs emerged, PGIM Fixed Income anticipated a downward revision of the credit ratings for Mexico and Pemex. PGIM Fixed Income was relatively early to observe the effect that heightened uncertainty in economic policy, Pemex’s growing burden on the sovereign, and the country’s persistently subdued growth would have on their credit profiles.

ECB Update

ECB Update
PGIM Fixed Income  PDF Opens in a new window

In this ECB Update, PGIM Fixed Income discusses last week’s decision by the European Central Bank to extend its forward guidance to June 2020.

The Great “Hollowing Out” of the U.S. Job Market

The Great “Hollowing Out” of the U.S. Job Market
PGIM Fixed Income   PDF Opens in a new window

In assessing the strength of the U.S. labor market since the global financial crisis, it is important to consider the quality of the jobs that have been created. This paper by PGIM Fixed Income finds that the jobs created through the current expansion have a distinct “barbell” feature consisting of a remarkable hollowing out of jobs in the middle of the income distribution.

Smart Diversification

Smart Diversification
QMA   PDF Opens in a new window

Allocation to absolute return strategies provides a smarter way to diversify portfolios than long-only balanced or risk parity approaches. Absolute return strategies go long where opportunities are attractive and short where they are unattractive, independent from traditional sources of asset class risk. Find out why this is so necessary in our current market environment, in this piece from QMA.

Capital Market Assumptions

Capital Market Assumptions
QMA   PDF Opens in a new window

See the Global Multi-Asset Solutions team’s views on global equities, fixed income, and real assets in QMA’s Q2 2019 Capital Market Assumptions.

Don’t Get Carried Away

Don’t Get Carried Away
QMA  PDF Opens in a new window

Investors who want more balanced exposure to macroeconomic risks could either vary their weights to asset class-specific carry portfolios, or complement the carry portfolio with other factor portfolios, such as value or momentum, to help build multi-asset carry portfolios that are better aligned with their goals.

Russia’s Path to Credit Strength Amid Biting Sanctions

Russia’s Path to Credit Strength Amid Biting Sanctions
PGIM Fixed Income   PDF Opens in a new window

Given the state of the Russian economy and the uncertainties that lie ahead, this paper by PGIM Fixed Income analyzes how Russia has coped with the sanctions thus far, what might lie ahead in the coming months and years, and how this might affect its strong credit profile going forward.

Countdown to Zero—The Final Chapters

Countdown to Zero—The Final Chapters
PGIM Fixed Income   PDF Opens in a new window

The recent reduction in global growth, inflation, and long-term interest rates occurred faster than PGIM Fixed Income expected. Therefore, our prior, already-below consensus long-term interest rate forecast appears too high. As the countdown to zero across the developed markets progresses (more in real terms in the U.S. and more in nominal terms in core Europe and Japan, for example), this paper looks at the factors that have continued to push the interest rate equilibrium lower and the market implications of an even lower-for-longer rate environment.

Frontier Case Study: Ecuador’s Path to Economic Sustainability

Frontier Case Study: Ecuador’s Path to Economic Sustainability
PGIM Fixed Income   PDF Opens in a new window

This paper showcases PGIM Fixed Income’s investment approach to frontier markets, which includes a combination of macroeconomic fundamental analysis, insight into the political backdrop, and inferences from in-person discussions with key stakeholders.

REITS Outperform During Recent Trade Tension Volatility

REITS Outperform During Recent Trade Tension Volatility
PGIM Real Estate  PDF Opens in a new window

In this commentary, PGIM Real Estate discusses the market impact of recent trade talks.

Why Midstream Infrastructure Deserves a Second Look

Why Midstream Infrastructure Deserves a Second Look
Jennison Associates  PDF Opens in a new window

Jennison Associates’ paper highlights the recent transformation of the midstream sector and why Jennison believes it is now better positioned.

The Outlook for Escalating Trade Tensions

The Outlook for Escalating Trade Tensions
PGIM Fixed Income   PDF Opens in a new window

PGIM Fixed Income’s assessment is that, despite the recent escalation, the U.S. and China clearly still desire to reach a deal. As such, our modal expectation is that the two sides reach agreement over the next six weeks or so—with the G20 meeting in Japan at the end of June a particularly good opportunity. Even so, the risks now are clearly skewed toward longer and more contentious outcomes.

Trade Tension

Trade Tension
QMA PDF Opens in a new window

Following is a thought leadership piece from QMA which examines the U.S. and China trade talks.

“Transitory” Brings Some Balance to Fed Outlook

“Transitory” Brings Some Balance to Fed Outlook
PGIM Fixed Income  PDF Opens in a new window

The Fed’s statement noted that inflation has declined and is running below the Fed’s 2% target. Powell's subsequent comments that the decline has been due to transitory factors threw cold water on the prospect of an impending rate cut. Our base case is that the Fed will likely remain on hold for the foreseeable future. PGIM Fixed Income sees the relatively stable growth backdrop, combined with the generally low levels of government bond yields, as contributing to an overall “search for yield” investment environment

Securitized Credit: A Closer Look at CLO Tranche Investing

Securitized Credit: A Closer Look at CLO Tranche Investing
PGIM Fixed Income   PDF Opens in a new window

This brief educational video by PGIM Fixed Income dispels the myths around securitized credit and provides insights into this $4 trillion sector. An accompanying Q&A with Edwin Wilches, U.S. Bank Loan & Structured Products portfolio manager, addresses the weakening credit quality of leveraged loans and how this may affect CLO tranche investing.

Credit Research Roundtable Series

Credit Research Roundtable Series
PGIM Fixed Income   PDF Opens in a new window

Following is the first in a series of semi-annual credit research roundtables. This new series summarizes the views and outlooks of PGIM Fixed Income’s credit analysts.

Implications of a U.S.-China Trade Deal: Who Wins? Who Loses?

Implications of a U.S.-China Trade Deal: Who Wins? Who Loses?
PGIM Fixed Income   PDF Opens in a new window

In this paper, PGIM Fixed Income provides some perspectives on these important questions. Drawing on a range of data, we look closely at the behavior of the U.S.-China trade imbalance and how a trade agreement might affect the imbalance going forward. We conclude that Chinese commitments to increase purchases of specific U.S. products are likely to successfully push up U.S. exports to China.

Securitized Credit: An Alternative Way of Lending

Securitized Credit: An Alternative Way of Lending
PGIM Fixed Income  PDF Opens in a new window

Securitized credit is often associated with complexity and risk, but the underlying principles of this alternative form of lending are genuinely quite simple. And that’s good news for investors looking for diversification relative to other fixed income sectors—not to mention the potential for attractive risk-adjusted returns. This brief educational video by PGIM Fixed Income dispels the myths around securitized credit and provides insights into this $4 trillion sector.

On the Markets

On the Markets
PGIM Investments  PDF Opens in a new window

Our quarterly chart series provides a data-centric view of key macroeconomic variables, market performance, and major trends in the equity, fixed income, and real assets markets.

Weekly View from the Desk

Weekly View from the Desk
PGIM Fixed Income  PDF Opens in a new window

Access our latest market overview on the state of the markets, the economy, and current events that are affecting the investment world.

Some content is provided by the Strategic Investment Research Group (SIRG), a unit of PGIM Investments, LLC, and a research unit of Prudential Financial. SIRG provides research, analysis and due diligence on investment management firms and the vehicles and strategies they offer.

Consider a fund's investment objectives, risks, charges and expenses carefully before investing. The prospectus and the summary prospectus contain this and other information about the fund. Contact your financial professional for a prospectus and the summary prospectus. Read them carefully before investing.

An investment in our money market funds is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the funds seek to preserve the value of your clients investment at $1.00 per share, it is possible to lose money by investing in the funds.

Mutual fund investing involves risk. Some mutual funds have more risk than others. The investment return and principal value will fluctuate and investor's shares when sold may be worth more or less than the original cost. Fixed income investments are subject to interest rate risk, and their value will decline as interest rates rise. Asset allocation and diversification do not assure a profit or protect against loss in declining markets. There is no guarantee a Fund's objectives will be achieved. The risks associated with each fund are explained more fully in each fund's respective prospectus. Your clients should consult with their attorney, accountant, and/or tax professional for advice concerning their particular situation.

This material is being provided for informational or educational purposes only and does not take into account the investment objectives or financial situation of any client or prospective clients. The information is not intended as investment advice and is not a recommendation about managing or investing your retirement savings. Clients seeking information regarding their particular investment needs should contact a financial professional.

Investment products are distributed by Prudential Investment Management Services LLC, a Prudential Financial company, member SIPC. Separately Managed Accounts are offered through our affiliates. Jennison Associates and PGIM, Inc. (PGIM) are registered investment advisors and Prudential Financial companies. QMA is the primary business name of QMA LLC, a wholly owned subsidiary of PGIM. PGIM Fixed Income and PGIM Real Estate, are units of PGIM. © 2019 Prudential Financial, Inc. and its related entities. Jennison Associates, Jennison, PGIM Real Estate, PGIM and the PGIM logo are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.

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