DoubleLine: CBs Have Turned More Accommodative As China Slows

DoubleLine International Fixed Income webcast for the month of April 2019, hosted by portfolio managers Su Fei Koo and Valerie Ho.

TAB I – Macro Outlook

International Fixed Income

Global Macro Drivers

  •  Global growth uncertainty
  • More accommodative Central Banks
  • China growth deceleration
  • Brexit

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Q1 hedge fund letters, conference, scoops etc

International Fixed Income

Falling Global Growth Expectations

DoubleLine

Source: International Monetary Fund (IMF), DoubleLine

International Fixed Income

Federal Reserve’s Summary of Economic Projections

DoubleLine International Fixed Income

Source: Bloomberg, DoubleLine

GDP - Gross Domestic Product, PCE - Personal Consumption Expenditure

International Fixed Income

Changing Fed Communication

DoubleLine

Source: Bloomberg, DoubleLine

International Fixed Income

Hikes Implied by Fed Fund Futures

DoubleLine

Source: Bloomberg, DoubleLine

International Fixed Income

More Accommodative Central Banks

Developed Market Central Banks Have Turned More Accommodative

ECB - Extended forward guidance stating that interest rates are expected to remain at their present levels at least through the end of 2019, slashed its growth forecast for 2019 to 1.1% from a prior 1.7% estimate, and offered a 2 year liquidity injection for banks through a TLTRO-III.

BoJ - Committed to Yield Curve Control and is unlikely to change its policy course until after the planned October consumption tax hike

BoE - On hold and watching for Brexit risks

BoC - Softened its hiking bias, highlighting a sharper than anticipated slowdown in the 4th quarter. The outlook continues to warrant a policy rate that is below the neutral range, dropping previous guidance that the interest rate would need to rise over time.

RBNZ - Took a dovish turn and stated the more likely direction of the next OCR move is down vs the previous February statement where the bank introduced symmetric forward guidance.

RBA - Turned more dovish, seeing downside risks to the global economy amid trade uncertainty and balancing a weak housing market with a strong labor market.

International Fixed Income

Falling G10 Rates

DoubleLine International Fixed Income

Source: Bloomberg, DoubleLine

International Fixed Income

China Economic Activity Slowing

DoubleLine International Fixed Income

Source: DoubleLine, Bloomberg

China Li Keqiang Index consists of the change in bank lending, rail freight and electricity consumption; China GDP annual percentage change; Eurozone Real GDP year-over-year: Gross domestic product (GDP) measures the final market value of all goods and services produced within a country. It is the most frequently used indicator of economic activity. The GDP by expenditure approach measures total final expenditures (at purchasers' prices), including exports less imports.

See the full slides below.



About the Author

Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver