Central Banks Versus Inflation: Your Questions Answered

This year has offered little shelter to investors trying to avoid downdrafts across all asset classes. Inflation has been stickier and more unpredictable than expected. The Federal Reserve and global central banks have been more hawkish as they struggle to manage inflation without creating economic harm. Global interest rates have been extremely volatile with consequences for stock valuations as equity prices and corporate earnings are cast into doubt. 

Everyone from investors to wage-earners has joined central bank policymakers in closely watching data releases to see which parts of the economy have begun responding to interest rates rising at the fastest clip in 40 years. Northern Trust hosted a webinar with clients on Sept. 28 where Katie Nixon, Chief Investment Officer for Wealth Management discussed clients’ most pressing questions with Carl Tannenbaum, Northern Trust’s Chief Economist, Chris Shipley, chief investment strategist for North America and Tim Johnson, head of portfolio solutions for global fixed income. This podcast is an excerpt from their conversation.

The group discusses:

  • How much economic pain will central banks tolerate in their efforts to control inflation? 
  • Are startling gyrations in deep and liquid markets such as currencies and global sovereign debt uncovering the potential for a financial crisis? 
  • How will we know when the stock market has reached a bottom?
  • Is the Federal Open Market Committee relying on the wrong indicators as it makes policy decisions? 


Carl Tannenbaum is the Chief Economist for Northern Trust. He briefs clients and colleagues on the economy and business conditions, prepares the bank’s official economic outlook and participates in forecast surveys. Before joining Northern Trust, Carl spent four years leading the Federal Reserve’s risk section. He was deeply involved in the central bank’s response to the 2008 financial crisis, helped to create and conduct its stress testing program, and advised senior Federal Reserve leaders on developments in banking and the financial markets.

Christopher Shipley is head of fundamental equities at Northern Trust Asset Management, where he oversees the firm’s fundamental equity research and portfolio management efforts. Chris is a voting member of the firm’s Tactical Asset Allocation Committee and Investment Policy Committee. He is also co-portfolio manager of the Northern Global Tactical Asset Allocation Fund.

Tim Johnson is the Head of Portfolio Solutions and member of the global fixed income team at Northern Trust Asset Management. In this capacity, Timothy heads three key groups within global fixed income: our passive/index business, portfolio construction, and quantitative research. In addition, Timothy is also a member of the Fixed Income Strategy Committee, a group that formulates the fixed income platform’s strategic macroeconomic and investment themes that in turn informs overall strategy, risk budgeting and portfolio construction across all fixed income portfolios.


As Rates Rise, do Bonds Belong in Real-World Portfolios?

The first quarter of 2022 saw negative returns across the U.S. bond market as persistently rising inflation surprised central bankers and bond investors alike. Dramatically rising interest rates have focused bondholders’ attention on fixed-income investments – even provoking some to abandon the asset class entirely.  

In this episode of Market Currents, Northern Trust’s Katie Nixon welcomes Peter Mladina, director of portfolio research for Wealth Management, to explore the purpose of fixed-income securities in volatile and uncertain conditions, which seem likely to shape the investing landscape for the foreseeable future. 

Mladina discusses:

  • The unique role of safer, risk-control assets in a portfolio and the foundational function they hold alongside return-seeking risk assets. 
  • How investors can structure a portfolio to secure high-priority goals by matching the maturity of risk-control assets with expected liquidity needs. 
  • Northern Trust’s Portfolio Reserve and how it is customized to secure a specified number of years of lifestyle spending.
  • Interest-rate risk and its headline role among the types of risk that fixed-income investors are exposed to, and a the way risk-control assets hedges them all through periods of volatility and unpredictability. 

Peter Mladina is responsible for applying research, tools and methods that support asset allocation, portfolio construction, investment selection and best practices in portfolio management to the wealth management investment process.

Peter is an Adjunct Professor of Economics at UCLA, where he teaches applied finance for the Master of Applied Economics program. His research on asset allocation and portfolio construction has been published in peer-reviewed journals and he is a co-author of the CFA Institute’s revised Level III asset allocation curriculum. He received a Bachelor of Arts degree in Economics from UCLA and Master of Business Administration degree from Edinburgh Business School.


Does Conflict in Ukraine Shift Global Energy Forever?

The war between Russia and Ukraine is a direct conflict between two of the world’s biggest commodity exporters, causing disruptions that will be felt for years. As European leaders seek to reduce or eliminate their countries’ exposure to Russian energy supplies and western companies voluntarily exit the country, maybe never to return, the conflict is reshaping global energy markets. 

In this episode of Market Currents, Jackson Hockley, Northern Trust’s analyst covering energy joins Chief Investment Officer Katie Nixon to talk through the ways Russia’s invasion of Ukraine and global reactions to the war are upending expectations for producers and consumers as well as a hoped-for green energy transition. 

Hockley discusses: 

  • The role that U.S. energy production plays in offsetting the loss Russian supplies of crude oil, natural gas and coal. 
  • China’s position as an energy consumer amid the geopolitical shifts the conflict has spurred. 
  • New challenges to a hoped-for green energy transition as energy security and decarbonization entail increasingly steep tradeoffs. 
  • The potential for a beneficial reevaluation of global goals for energy and how they may be achieved. 

Jackson Hockley is the senior energy and materials analyst at Northern Trust. He has followed the energy sector for more than three decades and is responsible for macro analysis of the energy and materials sectors as well as individual company research and stock recommendations. Jackson is a CFA charterholder and holds a bachelor of science degree in investment finance from Arizona State University.


Another Head Fake, or Brighter Future Ahead? Weighing the Case for European Equities in 2022

While the U.S. stock market has outperformed European indices for years, it is important to remain aware of the benefits of global diversification. And recently, we have begun to see changes in Europe giving us greater confidence in this view: European economic growth is expected to slightly outpace the U.S. this year, and equity market valuations have come down, potentially offering a more attractive entry point for geopolitical, monetary policy, earnings and sector diversification benefits. 

In this episode of Market Currents, Northern Trust’s Katie Nixon is joined by Wouter Sturkenboom, the bank’s chief investment strategist for the Europe, Middle East and Africa region as well as the Asia-Pacific region. Katie and Wouter discuss: 

  • The evolution of European fiscal policy from an austerity mindset to a pro-growth agenda
  • Lessons the European Central Bank is putting into practice for nurturing sustainable growth and supporting governments in difficult times with interest rates and liquidity
  • The relative weighting, valuations and profitability of the companies that make up U.S. and European indices and what each market may offer investors

About our guest:

Wouter Sturkenboom, CFA, CAIA, is chief investment strategist for EMEA and APAC at Northern Trust. He is responsible for formulating the regional asset allocation views, putting those views in a global context and communicating the firm’s opinions. As a member of the Interest Rate Strategy Committee and Investment Policy Committee, Wouter helps produce long-term asset class forecasts, as well as set tactical and strategic portfolio allocations and recommendations.

Wouter is a CFA® charterholder and is a certified Chartered Alternative Investment Analyst. He holds a master’s degree in international affairs from George Washington University and master’s degree in international economics from Maastricht University.



Vax Requirements, Boosters, Variants and Waves: Navigating the COVID-19 Information Deluge

Several months ago, it appeared as if a return to normalcy from the COVID-19 pandemic could be in sight. Primarily due to the spread of the Delta variant, however, the picture has become considerably more clouded. With individuals, companies, medical authorities and governments all continuing to react to the changing dynamics, and corresponding information and opinions broadcast 24/7, the landscape can be confusing and muddled. In this environment, expert insight is essential for all, including investors. 

In this episode of Market Currents, Northern Trust’s Katie Nixon is joined by healthcare sector senior analyst Erick Noensie to discuss the underlying data informing current expert views on the state of the pandemic. With a Ph.D. from Johns Hopkins Medical School, Erick has been an invaluable resource to Northern Trust clients throughout the pandemic. 

Erick discusses:

  • Why expectations for a fast U.S. decline in cases could be overly optimistic
  • The factors driving significant variations in infection rates in highly vaccinated countries
  • Whether loosening global travel restrictions are likely to impact case counts
  • Factors informing the CDC’s booster recommendations 
  • Whether COVID-19 is likely to become endemic, such as the seasonal flu

About Erick Noensie:

Erick Noensie is a Vice President at Northern Trust, where he covers the healthcare sector as a senior equity analyst. Prior to joining Northern Trust in 2018, Erick held several senior analyst and portfolio management roles focused on the healthcare, biopharmaceutical and biotechnology sectors at well-known asset managers. Erick received a Ph.D. in Medical Genetics from The Johns Hopkins School of Medicine and a B.A. in Biology from Cornell University.



Interest Rates: Grounded or Ready for Take Off?

As economic reopening continues and supply-demand imbalances lead to price increases, investors are understandably fixated on the future path of interest rates — a key driver of future growth and returns. But in this particularly unusual period of economic history, what will the Fed do?

Many believe higher inflation is transitory and that the Fed should wait it out. Others argue that it should take action now to get ahead of a potential problem in the future. 

In this episode, Colin Robertson, Northern Trust Asset Management’s head of fixed income, weighs in on this debate. To do so, he provides historical context, interprets Fedspeak and illuminates the economic and policy dynamics that will drive interest rates going forward. 

Colin discusses:

  • The drivers of low interest rates since the financial crisis 
  • Noise versus signal related to predicting future monetary policy 
  • The current and most likely future shape of the yield curve
  • Northern Trust’s outlook for total bond returns 
  • The merits of owning bond funds versus individual bonds
  • And more

About Our Guest:

Colin Robertson is an executive vice president and head of fixed income for Northern Trust Asset Management. This role includes overseeing fixed income investments for individual and institutional investment management accounts at Northern Trust, Northern Funds and Northern Institutional Funds. Through his leadership managing interest-rate-sensitive and credit-sensitive fixed income portfolios, Northern Trust has built a world-class fixed income team, investment process and products.


How Long Will the Chips Be Down? The Global Semiconductor Chip Shortage with Deborah Koch

As the U.S. economy continues to reopen amid relaxed COVID-19 mitigation measures, pent-up demand is outstripping supply in many cases. One acute example is in the semiconductor chip industry, which provides “the brain” inside a wide range of products that power our modern lives, including smartphones, cars and even washing machines. 

In this episode, Northern Trust’s Katie Nixon is joined by Senior Technology Analyst Deborah Koch to sort through this important topic and answer some key questions: How long will the global chip shortage last? What consequences could it have on inflation and the economy? What regulatory response will ensue? 

Deborah discusses:

  • An overview of the semiconductor industry and its role in the technology ecosystem 
  • An estimate of how long it will take to fix the supply-demand mismatch
  • Corporate and government responses to the strategic issues laid bare by the shortage 
  • The long-term outlook for the chip industry as companies pursue digital transformations
  • And more

About Guest:

Deborah Koch is a senior equity research analyst at Northern Trust focused on the technology sector. With more than 30 years of experience, she has built a track record of leveraging forward-thinking vision to identify and help clients benefit from market shifts in the technology sector. Before joining Northern Trust, Deborah held several senior analyst and portfolio management roles at well-known asset managers. She is a CFA® charterholder.


Inflation: Is It Different This Time? With Carl Tannenbaum


Concerns about inflation have filled financial headlines recently as U.S. consumers reemerge from their homes and take note of higher prices and supply shortages in certain areas of the economy. But will higher inflation last? Or will it quickly revert back to more modest levels seen in recent decades? 

In this episode, Northern Trust’s Katie Nixon is joined by Chief Economist Carl Tannenbaum to sort through this important topic, which has significant implications for the economy, markets and investors’ portfolios. 

Carl discusses:

  • What’s at stake when it comes to inflation — why containing inflation is important in the first place
  • The two broad categories of inflationary forces: cyclical and secular  
  • The drivers of recent spikes in consumer and producer prices
  • Why housing market inflation bears watching over the coming months 
  • Northern Trust’s near- and longer-term outlook for inflation 
  • And more

Related Insights:

About Guest:

Carl Tannenbaum is a chief economist at Northern Trust. In this role, Carl briefs clients and colleagues on the economy and business conditions, prepares the bank’s official economic outlook and participates in forecast surveys. He is a member of Northern Trust’s investment policy committee, capital committee and asset/liability management committee. Prior to working at Northern Trust, Carl spent four years leading the Federal Reserve’s risk section and was deeply involved in the central bank’s response to the 2008 financial crisis.


Value’s Uprising: Fête or Renaissance? – with Michael Hunstad and Chris Shipley

Does value investing still work?

After many years of underperformance, value stocks have shown signs of life in 2021 as investors’ conviction in strong economic recovery has gained momentum. 

Is this a turning point for value, or simply a short-term pop? Will value redeem itself, or will investors find their way back to growth stocks over the long term? Is something different this time? 

To help investors answer these important questions — which have important portfolio implications —  Northern Trust’s Katie Nixon is joined by the firm’s head of quantitative strategies, Michael Hunstad, and head of fundamental equities, Chris Shipley.

In this episode, you will learn:

  • If value really is a compensated risk factor 
  • The valuation metrics and other criteria Northern Trust uses to define value and identify opportunities  
  • The reasons behind value’s underperformance relative to growth in recent years
  • What needs to happen for value to sustainably outperform again
  • How to avoid value traps 
  • If and how to maintain exposure to both value and growth stocks 

Listen in as Katie, Mike and Chris explore the evidence and provide practical suggestions for investors grappling with the growth versus value conundrum. 

Resources:  Northern Trust | Katie Nixon | Michael Hunstad | Chris Shipley