Investment Insights

Thought leadership on the most compelling topics in investing today, including timely updates, market analysis and commentary.

Latest Insights

Latest Insights

It's time for your portfolio to break from tradition

Kathleen Gaffney and Kevin Dachille, September 2014

Given the current low-yield environment and with rising interest rates looming, now may be the right time to consider new strategies for generating favorable returns in your fixed-income portfolio.

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Four reasons to consider a trust to protect your assets

Andrew Friedman, August 2014

For many years, trusts have been the province of the wealthy — mysterious vehicles used to escape taxes and preserve assets for future generations. And for couples with joint assets approaching or exceeding $10.68 million (the current gift and estate tax exemption amount), a comprehensive estate plan that incorporates trusts is crucial for minimizing estate taxes.

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Toward the sounds of chaos

Richard Bernstein, August 2014

Investors continue to react to volatility by making emotion-driven decisions that take them out of the market and put their long-term financial goals at risk.

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Don’t ignore higher taxes until Tax Day

Municipal Insight Committee, August 2014

During the 2013 tax season, many investors in higher tax brackets were rudely awakened to the reality of paying 50% of their income in federal and state taxes. Given the new tax landscape, the federal tax advantage income municipal bonds provide may look more appealing than ever.

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Confronting the tax drag

Tom Metzold, Jim Evans, Lew Piantedosi, Peter Crowley; August 2014

The 2014 tax season brought home the unwelcome reality of higher taxes, particularly for high-income earners who bore the brunt of the tax increases. While people immediately saw the impact on their income, the effects higher taxes can have on investment returns is not as well recognized. People may know about using retirement plans, such as IRAs and 401(k)s, to manage the taxes on their investment returns, but they are often not familiar with a variety of other approaches that could help reduce their tax burden.

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Finding value in a challenging bond market

Payson Swaffield, July 2014

As investors have embraced risk in recent years, they have bid up the prices of non-Treasury debt to the extent that no sector is particularly cheap relative to its history. Regardless, we think the income markets offer considerable opportunity and that a deft hand may still pick out great value.

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Assessing whether Washington is ready to tackle tax reform

Andrew Friedman, July 2014

Everyone wants a simpler tax code and lower tax rates. But getting Democrats and Republicans to agree on the path to reform seems impossible. Circumstances – like the loss of U.S. jobs because of high corporate taxes – may eventually demand Congressional action.

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Lack of corporate hubris means elongated cycle

Richard Bernstein, July 2014

Despite the general consensus that a bear market is on the horizon, we do not think investors or corporations are yet setting the stage for an end to this bull market and the start of the next economic recession.

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Floating-rate loans are not just a rate hedge

Scott Page, Craig Russ, Christopher Remington; July 2014

The prospect of higher interest rates has many advisors and investors considering floating-rate loans. Because loans’ coupons regularly reset, these debt instruments can maintain their value even as rates rise. But the characteristics of loans, as well as their performance track record, suggest they may deserve a place in strategically allocated portfolios in any interest-rate climate.

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Earn equity-like returns without equity-like risk

Michael Weilheimer, Steve Concannon, Will Reardon; July 2014

High-yield bonds offer investors the potential to earn total returns comparable with equities without the level of volatility stocks have. While many income investors are naturally concerned about the prospects of higher interest rates, high-yield bonds have a set of characteristics that may enable them to maintain their value even as rates rise.

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What inning is the bull market in?

Edward J. Perkin, July 2014

Since the low of the bear market in March 2009, U.S. equities have been on a 5-year bull run. Investors naturally wonder how much longer this can last. To use a baseball metaphor commonly applied to the markets, they wonder what inning we are in. The answer depends on what “game” one is watching.

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Reconsidering today’s bond market risks

Kathleen Gaffney, July 2014

Pursuing returns from the bond market’s traditional risks – such as interest-rate and credit-risk – has become quite expensive. Treasury bonds, which are the most sensitive to interest-rate risk, have low yields and high prices now. Corporate debt, which also has credit risk, is similarly high priced. Investors may be better served by avoiding these “systematic” risks (so-called because they tend to have a blanket effect across whole categories of bonds). Greater opportunities may lie in pursuing “idiosyncratic” risks that are unique to each issuer of income securities.

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An allocation to currencies may provide income and lower an overall portfolio’s volatility

Michael Cirami, Eric Stein, John Baur, Matthew Murphy, Bradford Godfrey; July 2014

Most investors understand the benefits of diversification and the risks of owning just one security. But many overlook the benefits of broadening their currency exposure and have all their investments concentrated in the U.S. dollar. Investing in a mix of foreign currencies may lower the risks of an overall portfolio, provide additional sources of income and can potentially enable investors to pursue a wider array of opportunities around the world.

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Solving the Income Puzzle

Christopher Remington, Michael Cirami, Kathleen Gaffney, and Scott Page; July 2014

With interest rates at near historic lows, investors are starved for income. Government bonds and high-grade corporates have generally been the core of investors’ income portfolios, but yields on these bonds are minimal. Delivering a potential double whammy for investors, the prospect of rising interest rates could bring principal losses because the prices of bonds in these core sectors are highly sensitive to changes in interest rates. Diversifying into nontraditional income sectors may provide investors with greater income and lessen their exposure to interest-rate risk.

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Country Allocation: The Primary Determinant of International Equity Returns

Marshall L. Stocker, June 2014

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Macro-economic policy explains country-level equity returns

Marshall L. Stocker, June 2014

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Edward Perkin is Eaton Vance’s new Chief Equity Investment Officer

June 2014

In April 2014, Edward J. Perkin joined Eaton Vance as the firm’s new Chief Equity Investment Officer. He recently sat down for a Q&A to discuss his background, leadership style and vision for the Eaton Vance equity team, as well as his outlook on the stock market.

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Are you managing volatility?...or is it managing you?

June 2014

Research shows investors’ personal returns fall short of the equity markets’ actual returns because investors too often make the mistake of buying high and selling low. But there are several strategies investors and their advisors can draw on to take a more disciplined approach to investing.

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Assessing the impact of the midterm primaries

Andrew H. Friedman, June 2014

The success of moderate Republicans in Senate primaries increases the possibility that the GOP can win a majority of the seats in the Senate. The defeat of House Majority Leader Eric Cantor by a Tea Party-supported candidate will likely result in the House’s Tea Party members being able to exert much greater influence on positions the House leadership takes.

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Hexavest neutral on Japan

Frédéric Imbeault, June 2014

The policies of Japanese Prime Minister Shinzo Abe – known as “Abenomics” – succeeded in pushing the country out of recession and deflation. But further economic reforms are still needed, and other key economic and market indicators remain mixed.

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Bernstein: Emerging market debt seems risky

Richard Bernstein, June 2014

In their search for yield, investors may be overlooking the deteriorating fundamentals in the economies and currencies of a number of emerging market countries. Richard Bernstein believes the U.S. market may offer better, and less risky, opportunities for higher yield.

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The appeal of high-yield munis may increase

Cynthia Clemson and Thomas Metzold, May 2014

This year’s tax season was a rude awakening for many investors. For high earners especially, the tax rates on investment income have risen substantially. Increased taxes, combined with historically low yields and the prospect of higher interest rates eroding bond values, have a posed a triple threat for investors. But high-yield municipal bonds may offer a way to address these challenges.

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Worried about the downside?

Richard Bernstein, May 2014

In most investors’ minds, losing money is the biggest risk they fear. While many still seem unwilling to take on excessive risk with equities, their solution to managing risk seems to be broadening the number of asset classes they own. But looking at correlations, not the number of asset classes in a portfolio, may be the best way to seek protection from the downside risk of equities.

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Floating-rate loan core value remains, despite headlines

Scott Page, Craig Russ, and Christopher Remington; May 2014

The bankruptcy of Energy Future Holdings, the company formerly known as TXU, made headlines, as has other seemingly cautionary developments in the floating-rate loan market. But Eaton Vance still believes there are plenty of opportunities in the loan market for cautious investors who do fundamental credit research.

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How to tame an aging bull market

Bill Hackney, May 2014

The bull market that began in March 2009 is now 5 years old. We don’t see any signs that it will let up, even though economic growth remains low. With rallies this prolonged, managing risk becomes even more important. Active share, beta and downside capture ratio are three key measures advisors and investors can use to evaluate an asset manager’s ability to capture the opportunities and manage the risks associated with this type of market.

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Puerto Rico: what investors should watch for next

Municipal Insight Committee, May 2014

In February, the three major credit ratings agencies (S&P, Moody’s and Fitch) downgraded Puerto Rico’s general obligation (GO) rating to below investment grade, primarily citing the territory’s difficulty in accessing capital markets, its heavy debt load and a continued decline in its economy.

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Muni bonds’ appeal likely to be evident in 2014

Municipal Insight Committee, April 2014

2013 proved to be a difficult year for the municipal bond market with a few, high-profile negative news stories and fears that Fed actions could lead to higher interest rates. But 2014 offers a more promising scenario. Higher tax rates, in particular, are likely to cause more investors to realize the appeal of investing in tax-advantaged bonds.

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Consider equity funds' after-tax returns

April 2014

With higher capital gains tax rates, investors in high tax brackets can particularly benefit from strategies that are mindful of the after-tax returns equities deliver.

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A Classic Barometer

Richard Bernstein, April 2014

With the yield curve in the United States still steep by historical standards, there should be ample liquidity in the economy to fuel further growth. Generally yield curves in emerging markets, however, are either flat or inverted, a situation that could create liquidity issues and curb economic and profit growth in these markets.

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Investing in the Wake of the “Great Moderation:” Floating-Rate Loans as a Strategic Allocation

Scott Page, Craig Russ, Christopher Remington; April 2014

Floating-rate loans deserve consideration as a strategic portfolio position today because they may help:

  • Boost income in a low, flat-rate environment with yield potential that’s competitive with or greater than many longer-duration fixed-income investments.
  • Protect fixed-income portfolios against a potential rising-rate scenario and the erosion of fixed-income values that would result.
  • Reduce portfolio risk with historically near-zero duration and low correlation with other fixed-income sectors.

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Have you looked at India lately?

Eric Stein, Patrick Campbell; March 2014

In our judgment, it’s time to remove India from the ranks of the so-called “Fragile Five” emerging-market countries. We believe the strong investment case to be made for India today underscores the importance of taking a country-by-country approach to emerging-market investing.

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The Midterm Elections (And a Peek Toward 2016)

Andrew H. Friedman, March 2014

With fiscal deadlines out of the way for 2014, attention is now turning toward the 2014 midterm elections. This white paper covers a variety of Washington political matters: the reason for rampant partisanship in Washington and what it means going forward, what is likely to happen in the midterm elections and a glimpse toward the presidential election of 2016.

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Eaton Vance Viewpoints: Timothy Atwill on “Systematic Alpha” Investing

Timothy Atwill, March 2014

Timothy Atwill, CFA, Ph.D., Director – Research and Strategy for Parametric, discusses Parametric’s innovative investment approach — known as “systematic alpha” — and its application to emerging-market investing.

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The American Industrial Renaissance Revisited

Richard Bernstein, Q1 2014

It remains unlikely that the United States will be the manufacturing powerhouse that it was during the 1950s and 1960s, but many factors are suggesting that the U.S. industrial sector will continue to gain market share.

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Consider paying a premium for municipal bonds: Focus on yield to worst rather than a municipal bond’s price

Municipal Insight Committee, March 2014

  • The price of a premium municipal bond should not be the sole determinant of value
  • Yield to worst is a meaningful metric to help determine the value and risk of a premium municipal bond
  • In rising rate environments, higher cash flows from a premium municipal bond may help to protect purchasing power

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Market Share: The next secular investment theme

Richard Bernstein, Q1 2014

A myopic focus on profit margins may miss an important investment consideration. Whereas most investors remain fearful of margin compression, we prefer to search for an investment theme that could emerge if margins do indeed compress.

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Equity Bubble? No.

Richard Bernstein, Q1 2014

A growing contingent of market observers is fearful that the U.S. equity market is in some sort of a bubble. We disagree completely with this notion. A strong market rally that many investors have missed is hardly sufficient grounds for a financial bubble.

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Bond investing in a rising rate environment

Kathleen Gaffney, February 2014

After a transitional year like 2013, when a multidecade declining rate environment moved to a rising rate environment, we think it is important for investors to consider a multisector approach to finding value in the bond market. Finding bonds that can appreciate in price regardless of the interest-rate environment is what a multisector strategy generally seeks to accomplish. With interest rates still near historic lows and many bond investors concerned that yields will rise as ultra-accommodative monetary policy by the Federal Reserve (the Fed) comes to an end, we believe it makes sense to hunt for good relative values across a broad range of asset classes, particularly in nontraditional places.

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Important dates to watch in 2014

Andrew H. Friedman, January 2014

Looking forward into 2014, four dates – February 7, March 31, April 15 and November 4 – stand out as pivot points for events that could affect the markets, particular industries, and tax and financial planning.

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New Year, Same Higher Taxes

January 2014

Investors may be cheering a strong year of stock gains in 2013, but a rude surprise may be right around the corner. For 2013, the combined effect of several tax increases (capital gains, health care and reinstated limitations) will increase the tax burden on many investors by nearly 60%. These higher tax rates will remain in effect for 2014, so mitigating the tax drag on investment returns will continue to be a top priority for investors. We begin our look at what taxpayers can expect with a summary of the new 2013 tax rates.

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Key Investment Themes for 2014

Richard Bernstein, January 2014

Richard Bernstein annually publishes a list of investment themes that he believes are critical for the coming year.

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Is your inflation protection really protecting you?

Thomas Luster, Stewart Taylor, Kevin Dachille, December 2013

Many investors who own Treasury Inflation-Protection Securities (TIPS) and TIPS mutual funds don’t realize that they may be taking a significant amount of interest-rate risk in exchange for their inflation protection, which may result in losses when rates begin to rise rapidly. Investors may consider an inflation-protection investment strategy that avoids longer-term TIPS and seeks real returns through a strategy of using shorter-maturity TIPS and other shorter-duration assets, like floating-rate loans.

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Unresolved Issues Dominate as Washington Enters 2014

Andrew H. Friedman, November 2013

The compromise Congress reached to reopen the federal government and permit the United States to borrow funds kicked the can down a very short road. It set up a bipartisan committee to agree on an appropriations plan to finance government operations through 2014. If that committee fails to agree, then on January 15, 2014, Congress can agree to permit the next round of across-the-board spending cuts (known as “sequestration”) to take effect. If Congress fails to agree on the implementation of these cuts, then the government will shut down again.

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Portfolio Manager Viewpoints: Craig Brandon, CFA, on Municipal Floating-Rate Securities

Craig Brandon, November 2013

On August 19, 2013, Eaton Vance Floating-Rate Municipal Income Fund (the Fund) became the first floating-rate municipal income mutual fund offered to U.S. investors. By prospectus, the Fund is predominantly:

  • Floating-rate: At least 80% of the Fund must be invested in municipal floating-rate obligations, consisting of municipal floating-rate bonds and “synthetic” municipal floating-rate bonds — i.e., fixed-rate municipal bonds with an interest-rate swap that swaps the fixed rate to a floating rate.
  • Tax exempt: At least 80% of Fund assets must be exempt from federal income taxes.
  • Investment grade: At least 75% of Fund assets must be rated investment grade at the time of investment.

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A Last Minute Deal Averts Default – For Awhile

Andrew H. Friedman, October 2013

With the deadline for the United States to avoid defaulting on its debt fast approaching, Congress reached another late-night compromise to reopen the government and raise the nation’s debt limit. The deal also called for yet another bipartisan committee to try to set a budget for future government spending. Before discussing what that committee is likely to do, let’s compare the predictions I’ve been making since early this year against the reality of what ultimately occurred.

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Size is a Key Potential Advantage in the Municipal Bond Market

Ralph Studley, October 2013

Individual investors and financial advisors who seek to assemble a municipal bond portfolio on their own are required to navigate a highly fragmented market and assess a myriad of macroeconomic and fundamental factors. But finding the right security is only half the battle. Although independent credit research is a vital component of the selection process, it doesn’t guarantee that an investor will trade a municipal bond at the best possible price.

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The Federal Government Shuts Down: Now What Happens?

Andrew H. Friedman, October 2013

Washington insanity reached new heights yesterday as Congress failed to agree on an appropriations bill to keep the federal government running, even though it had known about the September 30 deadline for over six months. This inaction brings Washington dysfunction to a new high (or low). Up until now, Congress had arrived at each fiscal precipice and averted catastrophe with a compromise. Now, finally, Congress has gone over the edge.

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Congress Returns from Recess to Face Fiscal Deadlines

Andrew H. Friedman, September 2013

Congress returns from its August recess facing two imminent deadlines. First, Congress has appropriated funds to keep the federal government operating only through September 30, 2013. If Congress does not appropriate additional funds during September, on October 1 the federal government will shut down. House Speaker Boehner has said he will propose short-term “stop gap” legislation without conditions that would fund the federal government for a few more months at 2013 levels. If Congress adopts such a resolution, the funding deadline will be pushed later into 2013.

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