Advisory Blog

Timely insights on the issues that matter most to investors – Income, Volatility and Taxes.

The views expressed in these posts are those of the authors and are current only through the date stated. These views are subject to change at any time based upon market or other conditions, and Eaton Vance disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Eaton Vance are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Eaton Vance fund. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness.

  • All
  • More

Latest advisory blog entry

July 22, 2016 | 11:00 AM

Health care: End of the trend or just a pause?

Boston - The U.S. health care sector’s five-year winning streak against the S&P 500 is in jeopardy in 2016. We think this is simply a pause in the long-term trend and that fundamentals and key secular and macro themes should firmly support the sector.

Negative sentiment on high-growth areas of the health care market has hurt performance this year, while biotech, in particular, faces questions over drug pricing and the U.S. presidential election.

However, we believe earnings and valuations ultimately drive stock prices over the long term, and that the current uncertainty creates opportunity in the sector because the underlying fundamentals haven’t really changed. Although the sector has made up some lost ground the past few months, we still see a disconnect between prices and the fundamentals.

Health care is a traditional defensive sector, and its current 1.5% dividend yield is on par with U.S. 10-Year Treasury yields. But digging deeper, it is actually a fairly diverse sector consisting of half a dozen distinct industries. For example, pharmaceuticals are known for steady profits and dividends, while biotech stocks tend to be higher-growth and more volatile. We advocate having exposure to a little bit of every segment of the sector.

Putting it all together, we think the sector currently offers an attractive combination of below-average valuations and above-average earnings and sales growth.

From a valuation standpoint, the broader sector is currently trading at roughly a 16% discount to its 20-year average price to earnings (P/E) ratio.


Meanwhile, health care is ranked second-highest in estimated year-over-year earnings growth among S&P 500 sectors, and it is one of the few sectors for which analysts have revised their estimates higher recently.


Health Care: Profit Growth and Upward Revisions
Projected Year-Over-Year Earnings Growth (%) for S&P 500 Sectors

As of 3/31/2016 As of 7/20/2016
Consumer Discretionary 10.31 10.81
Consumer Staples 2.33 3.45
Energy -62.08 -67.89
Financials 5.00 1.02
Health Care 6.49 7.58
Industrials -0.03 -1.52
Information Technology 4.65 2.23
Materials -3.74 -1.20
Telecommunication Services -6.06 -6.72
Utilities 4.14 3.97
S&P 500 1.53 0.20

Source: FactSet, Eaton Vance.

Looking ahead, there are several macro themes that could drive the sector in coming years, including:

  • Demographics: An aging global population will fuel demand for a wide range of prescription drugs and health care services. By 2015, the number of people aged 60 or older is expected to double from 2010 levels to 16% of the world’s population, according to the National Institute on Aging.
  • Favorable regulatory environment: In 2015, the FDA approved the highest number of new drugs in 19 years.
  • Potential breakthrough drugs: Pipelines remain strong and pharmaceutical companies are spending the most ever on research and development (R&D) in dollar terms and as a percentage of sales, to develop therapies on major diseases such as Alzheimer’s, cancer and multiple sclerosis.

Bottom line: We believe the underperformance of the health care sector in 2016 is just a pause, and potential catalysts to reassert the long-term trend include sales and earnings growth, valuation reset and upward revisions.

Yana S. Barton, CFA

Portfolio Manager, Growth Team

Eaton Vance

The sector offers an attractive combination of below-average valuations, and solid earnings and sales growth.

Latest advisory blog entry

July 21, 2016 | 4:00 PM

Seeking value in the post-Brexit bond market

Boston - At the start of the year, we viewed investment sectors like U.S. high-yield bonds and floating-rate loans as extremely inexpensive based on historical and relative valuations. Those valuations attracted investors who bid up their prices and they are now closer to fairly valued, in our view. However, as the chart below shows, high-yield bonds and loans remain among the highest-yielding sectors.

These yields should be viewed in the context of the post-Brexit world – one in which central bank monetary support continues, but falls short of stimulating real economic growth. As a result, investors may have to recalibrate their return expectations. (Fiscal stimulus would help, but achieving political consensus in this regard is a major hurdle.)

Also, to the extent Brexit empowers similar anti-globalization sentiment within European countries, or even in the U.S., price volatility is likely to remain the norm. We’ve already witnessed a significant recovery in the U.K., European and U.S. stock markets. Yet we have not seen a comparable recovery in the bellwether 10-year U.S. Treasury bond yield – it is still below its pre-Brexit level. The bond market may be telegraphing that more price volatility lurks ahead. We do not believe the U.S. economy is headed for recession in the near term, but the fits and starts to growth are unlikely to go away.

Bottom Line: In a low-growth, low-expected-return environment, we believe below-investment-grade U.S. corporate credit – high-yield bonds and floating-rate loans – offers a compelling risk/return proposition. (We believe their high coupons should more than offset possible credit losses). Any sharp sell-off in these sectors – or in specific securities that are insulated from the direct impact of Brexit – could present even more attractive buying opportunities.

Payson F. Swaffield, CFA

Chief Income Investment Officer

Eaton Vance

We do not believe the U.S. economy is headed for recession in the near term, but the fits and starts to growth are unlikely to go away.

Latest advisory blog entry

July 20, 2016 | 10:15 AM

China: It’s the lenders, not so much the borrowers

Shenzhen, China – Alarmist headlines, such as “China Toxic Debt Solution Has One Big Problem” (Bloomberg, June 2, 2016), rightly cite that debt levels in China have grown at an astounding rate. Likewise, the economic impulse of recent, large debt-fueled spending is hardly perceptible in economic statistics. While the media continues to focus on the debt side of the equation, here’s what we think: China-watchers are viewing the debt build-up all wrong.

Market volatility tied to depositors’ trust

We believe the focus should be on monitoring bank liabilities—meaning their sources of funding—not bank assets, which are the loans whose growth rate is troubling most investors and journalists. Any loss of confidence by those who have entrusted assets to Chinese banks is more likely to trigger excessive financial volatility and could dash any hope of a soft-landing.

Reminbi is potent barometer for depositor confidence

A key metric to monitor depositors’ confidence is their willingness to hold reminbi (RMB)-denominated assets as measured by reported monthly capital outflows from the RMB into foreign currency. After large outflows subsided in recent months, we believe outflow pressure is resuming as the RMB recorded a 3% devaluation versus the U.S. dollar in the second quarter of 2016, its weakest level in nearly six years. The levels of foreign currency reserves at the People’s Bank of China, the country’s central bank, should also be closely monitored.

Short-term loans prop up distressed corporate borrowers

For those focused on Chinese borrowers, the quality of bank assets is indeed deteriorating. One-third of companies with an interest rate coverage ratio of less than 1.0 actually increased their borrowing last year. One strategy to deal with distressed corporate borrowers, sometimes referred to as ‘zombie companies,’ is to rollover debts into new short-maturity obligations, a process called ‘ever-greening.’ As evidence, nearly 50% of onshore RMB bonds issued by Chinese corporates in 2016 have tenors of one year or less.

Bottom Line: While the growth of debt and overall debt levels is cause for concern, we believe borrowers will likely be able to roll over their loans or the government will assume the liabilities. A loss of depositor confidence could cause a financial reckoning, an event Chinese leadership is urgently trying to avoid by implementing much-needed economic reforms.

Marshall L. Stocker, PhD, CFA

Global Macro Equity Portfolio Manager

Eaton Vance

Chinese leadership is urgently trying to avoid a financial reckoning by implementing much-needed economic reforms.

Latest advisory blog entry

July 19, 2016 | 10:30 AM

What’s on tap for the rest of 2016?

Boston – The ongoing fallout from Britain’s June 23 vote to leave the European Union will likely continue to influence markets in the weeks and months ahead. That aside for now, there are many other potential market catalysts on the calendar for the rest of 2016, including (but by no means limited to):

Q3 catalysts

  • Corporate earnings season (July 11 – August)
    • We expect overall second-quarter earnings for U.S. companies to be broadly in line with consensus forecasts.
    • Investors will likely favor companies that deliver strong revenue growth, not simply earnings that are “manufactured” from cost cutting and stock buybacks.
    • There may be a number of companies that are forced to lower their earnings guidance going forward.
  • Republican National Convention (July 18 – 21)
    • The RNC is likely to be more contentious than usual; in fact, as of this writing, there was still some speculation about a possible contested convention.
    • The party platform, the choice of VP candidate, and the prime-time speeches will all impact how the convention is perceived by voters and investors.
  • Democratic National Convention (July 25 – 28)
    • Depending on what is emphasized at the convention, health care and financials are two sectors that might experience volatility.
    • It will be interesting to see how much voice is given to Bernie Sanders’ supporters and their priorities.

    Q4 catalysts

    • Election Day (November 8)
      • At the November 2 Fed meeting, the Fed is likely to take no action so as to avoid roiling markets six days before Election Day.
      • If the likely outcome of the election appears clear to investors, Election Day may not produce much of a market reaction.
      • Regardless of who wins, the equity market may prefer to see the same party capture the House and the Senate.
    • OPEC meeting (November 30)
      • A production cut coming out of this meeting would be supportive of oil prices, but is unlikely, in our view.
    • Final Fed meeting of 2016 (Dec. 14)
      • Barring unforeseen developments, the probability of an interest-rate hike by the Fed on or before its December 14 meeting was still relatively low.

      Bottom line: We believe most investors should remain focused on their long-term strategy and, where appropriate, be opportunistic in the face of whatever surprises and volatility the coming months may bring.

                                  Edward J. Perkin, CFA

                                  Chief Equity Investment Officer

                                  Eaton Vance

                                  We expect overall second-quarter earnings for U.S. companies to be broadly in line with consensus forecasts.

                                  Latest advisory blog entry

                                  July 18, 2016 | 10:30 AM

                                  (The Republic of) Georgia on my mind

                                  Tbilisi, Georgia - Georgia probably isn’t the first country that comes to mind when most investors think about emerging market debt. And it is doubtful that the likely issuance of bonds today by the Bank of Georgia’s holding company will be on your Twitter timeline. But a recent visit to Georgia, as part of our ongoing due diligence, helped confirm why such “off the radar” countries are often on our long-term bullish list.

                                  Georgians have shown an impressive ability for economic reform and for reinventing themselves. Russia cut off its huge trade volume with the country prior to their five-day war in 2008, and Georgia found other trading partners. After the war, it bounced back, in no small part to entrepreneurial initiatives like encouraging Iranian tourism through visa-free access. That got cut short with the advent of U.S.-led sanctions, but is now booming again.

                                  Since 2010, GDP growth has averaged 5% a year, although it has slowed recently. The government is taking a further pro-growth step by lowering to zero the tax rate on most companies for reinvested profits – a clue as to why Georgia ranks 24 out of 189 countries in the World Bank’s current “Doing Business” report.

                                  Bottom line: Georgia certainly faces challenges, like depressed oil prices weighing on major trading partners. The country also must continue to walk a line between placating Russia and following its desire for integration with Europe. But Georgia has repeatedly shown it understands the power of a liberal economy to improve standards of living and maintain democracy – a good recipe for bondholder security, too.

                                  Eaton Vance Global Income Team

                                  Eaton Vance

                                  Georgia has repeatedly shown it understands the power of a liberal economy to improve standards of living and maintain democracy.

                                  Latest advisory blog entry

                                  July 15, 2016 | 2:30 PM

                                  The markets are confused, but you shouldn’t be

                                  Boston – Ever since the U.K.’s surprise vote to exit the European Union on June 23 (the so-called “Brexit’), we have been getting mixed messages from the equity market versus bonds, commodities and currencies.

                                  As far as U.S. equities, the S&P 500 Index and the Dow Jones Industrial Average have more or less recovered their post-Brexit losses. Yet, consider that, as of this writing late last week:

                                  • The price of crude oil (like equities, a “risk-on” asset) had fallen roughly 12% in a month.
                                  • Treasury yields (a “risk-off” asset) were at 2012 lows amid many investors’ flight to quality.
                                  • The price of gold (another “risk-off” asset) was near a two-year high as many investors sought perceived “safe havens.”
                                  • The Japanese yen, driven by deflation fears, had strengthened back to 100; the U.S. dollar also remained strong.

                                  Adding to the confusion, the healthy jobs number last week has been good for stocks that benefit from higher interest rates, while long-term Treasury yields have remained low. As of this writing:

                                  • The implied probability of a Fed rate hike by December 2016 had moved from 12% to 22% overnight.
                                  • The 10-year U.S. Treasury yield was essentially flat at 1.39%.
                                  • Utilities stocks, which typically benefit from lower rates, were also essentially flat.
                                  • Bank stocks were up 2% -- they typically benefit from a steeper yield curve, which helps their spreads.
                                  • Life insurers were up 3% -- these companies benefit from higher long rates, which lessen the burden of their long-term liabilities.

                                  It’s difficult to draw any definitive conclusions from all of this, except to say that the Brexit outcome clearly surprised the markets and appears to have thrown many investors into a state of confusion and uncertainty. There will likely be other surprises going forward, as the second half of 2016 is full of potential market catalysts – not only the specter of further Brexit turmoil, but also Fed meetings, a U.S. presidential election, corporate earnings and incoming economic data.

                                  Bottom line: Against this uncertain backdrop, we continue to believe investors should stay focused on the long-term prospects of their holdings and look to take advantage of potential opportunities that may arise in the period ahead.

                                  Edward J. Perkin, CFA

                                  Chief Equity Investment Officer

                                  Eaton Vance

                                  The rest of 2016 is full of potential market catalysts.

                                  Latest advisory blog entry

                                  July 14, 2016 | 10:30 AM

                                  Laddered investing seeks predictability amid uncertain markets

                                  New York – Investors have grown accustomed to living in a prolonged period of volatility and market uncertainty. As a result, consistency and predictability are as important as ever for a core allocation in any client’s portfolio.

                                  2016 started on the heels on a Fed rate hike with many more expected to be on the way. The market, however, had other plans as global growth prospects dampened based on:

                                  • A flare up in the Middle East spurring mass migration to the Eurozone;
                                  • the continuing slowdown in China
                                  • and, sluggish growth in the U.S.

                                  More recently, the outcome of the recent Brexit referendum and the upcoming U.S. elections are serving to keep volatility high.

                                  Now more than ever, the consistency offered by rules-based investing is making sense to investors seeking predictability in their portfolio. When it comes to income investing, a bond-laddering strategy can be employed to help defend against higher interest rates (through regular, methodical reinvestment) and to deliver the potential for rules-based consistency and a predictable investment experience.

                                  Go-anywhere or opportunistic investment styles give managers flexibility to make portfolio decisions on characteristics including duration, yield curve allocation, and credit quality. The consequence however is a changing investment complexion with regard to these characteristics, which in turn impacts the overall portfolio.

                                  With a bond-laddering approach, the portfolio manager typically does not make duration, credit, or yield curve bets, but rather focuses on following a rules-based investing strategy. A bond-laddering approach is generally managed for consistency and predictability, which can be powerful attributes in uncertain times.

                                  Bottom Line: Now more than ever, when it comes to a core allocation in the income portfolio we believe consistency and predictability are two attributes investors find most attractive.




                                  Corporate laddered investments in corporate debt obligations are subject to the risk of non-payment of principal and interest. Changes in economic conditions or other circumstances may reduce the capacity of the party obligated to make principal and interest payments on such instruments and may lead to defaults. Such non-payments and defaults may reduce income distributions. The value of a debt obligation also may decline because of concerns about the issuer's ability to make principal and interest payments. In addition, the credit ratings of income securities may be lowered if the financial condition of the party obligated to make payments with respect to such instruments change.

                                  Chris Harshman, CFA

                                  Municipal Portfolio Manager

                                  Eaton Vance

                                  A bond-laddering approach is generally managed for consistency and predictability, which can be powerful attributes in uncertain times.

                                  Latest advisory blog entry

                                  July 13, 2016 | 11:45 AM

                                  Sizing up the 2016 general election

                                  Washington, D.C. – Heading into the party conventions, the candidates for the 2016 presidential election are set. With control of both Houses of Congress also at stake, the buildup to the general election promises to be as exciting – and exhausting – as the primaries.

                                  The Electoral College and Party Affiliation

                                  Tallying electoral votes from states a party has consistently won, Democrats head into the election with 257 electoral votes, while Republicans can count on 191 electoral votes. It takes 270 electoral votes to become president. Registered Republicans (26%) and Democrats (29%) are almost evenly split. Thus, capturing the votes of Independents (42%) is one key to winning the election.

                                  Bottom line: Election metrics, combined with Trump’s historical unpopularity, make Clinton the heavy favorite. But, as Mike Tyson famously said: “Everyone has a plan until they get punched in the mouth.” How – and will – Clinton handle the Trump onslaught?

                                  Our new paper, “Sizing up the 2016 general election,” delves into the election’s underlying metrics, reviewing challenges each candidate must overcome to win, and offering predictions as to the likely results.




                                  Andrew H. Friedman is the principal of The Washington Update LLC and a former senior partner in a Washington, D.C. law firm. He and his colleague Jeff Bush speak regularly on legislative and regulatory developments and trends affecting investment, insurance and retirement products. They may be reached at www.TheWashingtonUpdate.com.

                                  Andrew Friedman

                                  Principal

                                  The Washington Update

                                  Election metrics, combined with Trump’s historical unpopularity, make Clinton the heavy favorite.

                                  Latest advisory blog entry

                                  July 12, 2016 | 10:30 AM

                                  Monetary policy: Too much of a good thing?

                                  Boston – Many assets are back to their pre-Brexit highs following the market volatility right after the “Leave” vote won on June 23 (See my recent post). While some such as the British pound and European bank stocks are notably lower, many other “risk” markets, including equities, credit and emerging-market assets, are at – or above – their levels from before the Brexit vote.

                                  Does this phenomenon make sense?

                                  While some may say that the rally in “risk” assets following the “Leave” vote winning is a classic example of “buy the rumor and sell the fact,” I think the moves we have seen in markets are only justifiable for one main reason – investors are banking on lower and lower rates from central banks for ever longer and longer periods of time. We have seen significant declines in many government bond yields since the Brexit vote, with many of those markets moving in sync with each other.

                                  At first glance, global central bankers must be happy that these “risk” markets are rallying following the outcome of the referendum. However, I think if asset prices keep rising (with the S&P 500 now basically at a record high), they may start to get concerned that asset markets are trading at valuation levels that are only justifiable based on perceptions of ever-lower discount rates. While there are a few market participants discussing how monetary policy may be leading to asset price bubbles, this concern seems the farthest thing from the minds of most central bankers, as they are more concerned about getting growth higher and preventing a deflationary mindset from setting in. With that said, if markets continue to rally, policymakers should be somewhat scared that even supposed bad news for markets such as the “Leave” vote winning can’t lower market prices and that markets are becoming overly dependent on the (always) increasing expectation of future monetary policy.

                                  The Fed’s next move

                                  Currently, the Fed is clearly in wait-and-see mode post-Brexit, but after Friday’s strong payroll print, even it might get concerned at some point that ever-lower yields may certainly be sowing the seeds for future financial stability risks. In February 2013, then-Fed Governor Jeremy Stein (no relation to me) came out with a speech titled, “Overheating in Credit Markets: Origins, Measurement and Policy Responses.” This speech, along with other work by Stein really, laid the intellectual groundwork for the Fed to begin “tapering” its purchases of U.S. Treasury securities. Although the Fed didn’t begin “tapering” until December 2013, the mere expectation that tapering would begin led to the so-called “Taper Tantrum” in financial markets during the late spring and summer of 2013.

                                  Bottom Line: While we still think there are opportunities in broad credit and emerging-market assets today, we will be carefully watching the reaction of global central bankers. And while we don’t see any current monetary policymakers sounding the alarm bell yet (as Jeremy Stein did in February 2013), at some point, they may think they are getting too much of a good thing.

                                  Eric Stein, CFA

                                  Co-Director of Global Income

                                  Eaton Vance

                                  Policymakers should be somewhat scared that markets are becoming overly dependent on the (always) increasing expectation of future monetary policy.

                                  Latest advisory blog entry

                                  July 11, 2016 | 11:30 AM

                                  EM debt market likes Brexit. Maybe it shouldn’t.

                                  Boston - Emerging market (EM) debt has been a relative island of calm in the wake of the June 23 Brexit decision, with spreads tightening and yields falling. The logic of the market’s initial reaction is clear: Central banks are now expected to keep monetary policy accommodative for an extended period, trying to stimulate economic growth. A low-rate environment in developed markets historically has been supportive of EM debt, and for other risky asset classes.

                                  But as we consider the longer-term potential impact on the global economy, there are good reasons to be cautious on the sector:

                                  • Low growth is a threat. The policy uncertainty resulting from the Brexit vote will certainly weigh on already fragile economic growth in Europe. If the slowdown is material, this will be a headwind for EM assets. China, which is the largest importer of emerging market goods, has also been struggling with slower growth, so a fall-off in demand from European countries could be especially harmful to EM economies.
                                  • Financial contagion is a wildcard. On July 5 and 6, open-end U.K. property funds froze withdrawals after experiencing a run by investors. At the same time, Italian banks that were saddled with bad loans prior to Brexit have seen their shares hammered since June 23, based on fears that Italy’s protracted economic slump will worsen. We haven’t seen any reports of broader contagion so far, but this is a risk that bears watching.

                                  Bottom Line: We do not currently have a strong view about how these factors will play out – as many observers have noted, the substantive economic impact of Brexit will take a while to develop. But investors in EM debt should avoid the temptation of complacency – the potential risks to the sector are real, and need to be monitored carefully.

                                  Eaton Vance Global Income Team

                                  Eaton Vance

                                  There are good reasons to be cautious.

                                  Latest advisory blog entry

                                  July 8, 2016 | 4:30 PM

                                  Reports of the US labor market’s demise are greatly exaggerated

                                  Boston - The June nonfarm payroll number came in very strong, as the U.S. economy added 287k jobs in the month, well above expectations of 180k. The June print is a dramatic turn of events from May, where the U.S. economy only added 11k jobs, which we argued was distorted by one-off events. The reality is, the labor market was never as weak as the print in May and it isn’t as strong as the print in June. The three-month average of 147k job additions per month is probably a more accurate depiction of the true strength of the labor market.

                                  The details of the report were fairly strong across the board:

                                  • Wage inflation continues to creep higher, as average hourly earnings increased 2.6% year-over-year, up from 2.5% last month. As slack continues to be removed from the labor market, this trend should continue higher.
                                  • After declining from 5% to 4.7% last month, the unemployment rate rose back up to 4.9%. The rate increase was partly due to an increase in the labor force participation rate, which will be viewed favorably by the Fed.
                                  • The service sector remained the main driver of job growth, adding 278k jobs in June. A positive on the goods-producing side of the economy is that the manufacturing sector actually added 14k jobs – only the second positive print we have had from the sector in the last five months. It would seem the manufacturing sector might finally have worked through the pain from the dollar rally in 2014 and 2015.
                                  • As has been the case all year, the health care sector continues to be the star performer in the U.S. labor market, adding 58k jobs in June and nearly 600k over the last year.
                                  • The Verizon strike, which weighed heavily on the prior report, was reversed in this month’s report, as the information sector added 44k jobs after a 39k subtraction last month.

                                  Bottom Line: The U.S. economy and labor market are among the strongest for the world’s developed markets, although this is admittedly a very low bar. While this strong report will ease some of the Fed’s concerns that the labor market was taking a turn for the worse, it will not be enough to put rate hikes back on the table near term. While the U.S. data continues to surprise to the upside, the Fed will want more time to see the implications on the U.S. economy from the U.K. referendum.

                                  Andrew Szczurowski, CFA

                                  Portfolio Manager, Global Income Group

                                  Eaton Vance

                                  This strong report will not be enough to put rate hikes back on the table near term.

                                  Latest advisory blog entry

                                  July 8, 2016 | 10:30 AM

                                  So bad it’s good: Why China defaults may spur long-term economic growth

                                  Shenzhen, China – China observers are often all wrong when interpreting ongoing economic and financial developments. We believe slowing gross domestic product (GDP) growth and increasing rates of corporate defaults are a positive rather than negative milestone for intermediate and long-term investors.

                                  Red flags, but few defaults

                                  From 2007-2015, China’s debt-to-GDP ratio has risen by more than 100%, reaching approximately 240% of GDP, with the biggest three-month increase on record in the first quarter of 2016. Some estimates suggest the debt is approaching 300% of GDP. We agree that China’s high debt-to-GDP ratio is a red flag, but China’s situation is unique. Here’s why:

                                  • Unlike many emerging markets, China’s debt is largely held by heavily-indebted state-owned enterprises (SOEs). SOE profits and profitability have been declining.
                                  • China’s last financial cycle of defaults was more than 15 years ago, having largely escaped the global financial crisis.

                                  Bad loans propped up by Chinese banks slow growth potential

                                  The rate of Chinese corporate defaults in 2016 is two to three times higher than in 2015. While SOEs are beginning to default, the rate of corporate defaults in China remains remarkably low as distressed corporate borrowers are being kept on life support by lenders who don’t want to realize losses from prior loans.

                                  On June 14, Sichuan Coal Group, Sichuan province’s largest SOE coal miner, defaulted on a RMB 1 billion bond ($153 million). We see this as a positive development, as China’s coal industry is characterized by gross over-capacity. In the same week, Shanxi province asked banks to adjust lending periods and repayment methods for loans made to coal miners, an obfuscating technique called ‘ever-greening.’ We see this as a negative development.

                                  Short-term pain lays groundwork for long-term gain

                                  For investors to make substantial returns from Chinese equity holdings, they should pine for higher rates of corporate defaults. The process of default, bankruptcy, and restructuring or liquidation leads to a more efficient allocation of capital and cessation of un-economically viable projects. While this may negatively affect equity returns in the short-term, it would address the ongoing, inefficient allocation of capital to poorly performing industries. The result could be a slower rate of GDP growth in the short-term, which could be a good thing.

                                  Bottom Line: We expect default rates to accelerate in the coming months and that market volatility will increase as investors speculate on whether the defaults will occur in an orderly or disorderly fashion. We believe the sooner defaults happen and GDP growth slows, the better the chances for an orderly re-allocation of capital.

                                  Marshall L. Stocker, PhD, CFA

                                  Global Macro Equity Portfolio Manager

                                  Eaton Vance

                                  We believe the sooner defaults happen and GDP growth slows, the better the chances for an orderly re-allocation of capital.

                                  Latest advisory blog entry

                                  July 7, 2016 | 10:30 AM

                                  You Brexit, You Bought it.

                                  Boston – While the UK economy, its currency and financial markets are likely to bear the brunt of the Brexit vote, the U.S. investment-grade bond market may indirectly benefit, making it an effective diversifier to equities during this period of increased volatility. The ramifications from an unprecedented event like this are difficult to forecast, but they may fuel a few trends currently in place.

                                  Low U.S. rates: When the U.S. Federal Reserve (Fed) raised short-term interest rates by 0.25% in December 2015, Fed leaders anticipated four additional rate increases in 2016. But, as equity markets ushered in 2016 with record losses, foreign central banks responded with additional quantitative easing measures, while the Fed left monetary policy unchanged. Following the Brexit vote, the probability of even one Fed rate hike in 2016 plunged to 8%, from 76% at the beginning of June.

                                  Strong foreign demand: U.S. fixed-income markets should continue to attract strong demand from foreign investors searching for yield, given the negative rates on many European and Asian sovereign bonds. While 10-year U.S. Treasury rates had recently fallen to 1.45% and are closing in on their 2012 record low, corporate yields are around 3.0%, trading at the lower end of their three-year range.

                                  Increased volatility: The uncertainty associated with the timing and terms of the UK exit from the EU will weigh on investor confidence in the near-term, likely causing bouts of stock price volatility as details of the plan are released. The risk of a recession is a growing concern, as market weakness and political risk begin to erode consumer confidence in Europe.

                                  Flight to quality: In recent weeks, higher-quality bond funds have experienced healthy inflows, reflecting many investors’ preference for defensive, stable assets.

                                  The UK unwinding its 40-year relationship with the EU is bound to foster continued volatility, but each global market will be impacted differently. In the first two days of trading following the Brexit vote, the S&P 500 Index fell 5.3%, whereas the Barclays Aggregate Bond Index rose 1.8%.This type of negative correlation is the foundation of a diversified portfolio, with some asset classes helping to smooth overall portfolio returns when other asset classes decline.

                                  Bottom line: As during past market downturns, diversifying equity risk using investment-grade bonds may prove an effective way to stay fully invested and earn more attractive returns in the period ahead.

                                  Bernie Scozzafava

                                  Diversified Fixed Income Portfolio Manager

                                  Eaton Vance

                                  Diversifying equity risk using investment-grade bonds may prove an effective way to earn attractive returns in the period ahead.

                                  Latest advisory blog entry

                                  July 6, 2016 | 10:30 AM

                                  The Music Stops in Puerto Rico

                                  Boston – Puerto Rico’s 14 municipal bond issuers had been widely expected to default on a large portion of $2 billion in debt service due on July 1, so the default on just over $1.0 billion in debt service that was due was not a surprise. What did take the market somewhat by surprise, however, was that the significant default extended to the Commonwealth’s constitutionally guaranteed general obligation (GO) bonds, where only $152 million of the $956 million that was due was actually paid.

                                  Developments were moving quickly in Puerto Rico as the quarter drew to a close. Lacking the funds for full debt service on June 30, Puerto Rico Governor Alejandro Padilla declared a state of emergency and enacted a debt moratorium on the Commonwealth’s debt and of all governmental entities through January 31, 2017.

                                  Also on June 30th, President Obama signed into law the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), following passage in the Senate with a strong bipartisan vote of 68-30 on June 29. House approval came on June 9, by a vote of 292 to 127. The main aspects of PROMESA include:

                                  • A seven-member Federal Oversight Board, which will have significant control over Puerto Rico’s finances, and have the ability to draft budgets and a long-term fiscal plan.
                                  • A debt-adjustment provision patterned after federal Chapter 9 bankruptcy rules, which would allow debtors to adjust their debts only after voluntary attempts at restructuring had been made.
                                  • An Automatic Stay on litigation until at least February 15, 2017, which would allow the Federal Oversight Committee time to get up and running.

                                  Importantly, Puerto Rico Electric Power Authority (PREPA) and Puerto Rico Aqueduct and Sewer Authority (PRASA) were not included in the debt moratorium. Due to $264 million in loans from bond insurers, PREPA will fully pay the $423 million that is due. PRASA defaulted on $13 million of its $147 million in July debt service.

                                  Bottom Line: Despite the defaults on more than $1 billion in debt, Puerto Rico’s cash reserves remain very tight, and future defaults and debt restructurings are inevitable. With the passage of PROMESA, the path forward for Puerto Rico creditors will be in the hands of the federally appointed Oversight and Management Board.

                                  William Delahunty, CFA

                                  Director of Municipal Research

                                  Eaton Vance

                                  Future defaults and debt restructurings are inevitable.

                                  Latest advisory blog entry

                                  July 5, 2016 | 1:30 PM

                                  Despite Brexit, emerging market debt posts strong Q2 returns

                                  Boston- Despite the volatility from Brexit, Q2 was a strong quarter from emerging market (EM) debt across the board, as we highlight in our newly published Eaton Vance Emerging Markets Debt Chart Book Q2 2016. The widely followed local-currency-denominated debt index (JPMorgan GBI-EM Global Diversified) returned 2.96% for the quarter bringing YTD performance to 14.30%. Performance for the GBI-EM was driven by high carry (its relative yield advantage) and lower rates. As highlighted on page 23 of the report, Brazil performed particularly well, with the currency up slightly more than 10% in the quarter.

                                  The U.S dollar-denominated EM sovereign debt index (EMBI Global Diversified) and the U.S dollar-denominated EM corporate debt index (CEMBI Broad Diversified) returned 5.02% and 3.77%, respectively. Almost half of those returns were attributable to the decline in US Treasurys.

                                  Bottom Line: The outlook for EM assets is more challenging. In our quarterly EMD chart book we outline our view that EM rates and sovereign credit are more attractive than EM FX and EM corporate credit. However, investors need to tread with care. After the post Brexit rally in emerging market assets, we see a material risk of a broad based correction.

                                  Eaton Vance Global Income Team

                                  Eaton Vance

                                  Investors still need to tread with care.

                                  Latest advisory blog entry

                                  July 5, 2016 | 10:30 AM

                                  Brexit vote attests that truth can be stranger than fiction

                                  Atlanta - Odds-makers in the U.K. expected the Brexit vote to land squarely in the “remain” camp, but life is full of outcomes that most people don’t expect. One year ago, who would have thought that Donald Trump would be the presumptive nominee for the Republican Party, or that Bernie Sanders would mount a viable campaign against Hillary Clinton? And, lots of folks thought the Golden State Warriors and their superstar MVP Stephen Curry were a lock for repeating as NBA champions.

                                  It’s about the small stuff

                                  We are often asked to explain our macro outlook and how it impacts our portfolio positioning. While we certainly stay abreast of events like the British referendum, the success of our high-quality investment process is not dependent on getting “macro calls” right or wrong. Instead, we find it is much more important to be correct about the “micro” – namely, finding good businesses that produce stable and consistent earnings in both difficult and accommodative economic environments.

                                  Volatile markets may create opportunities

                                  Markets around the world have reacted to the Brexit decision with a roller coaster ride for investors. While heightened market volatility can be unsettling, we view it as an opportunity. In fact, some of our best performance has come during periods of market weakness. If you lose less money in down markets, you have more assets to grow when things eventually turn around.

                                  Bottom line: We are constant proponents of high-quality investing, and the potential for increased market volatility going forward may make now an especially good time to consider high-quality investment strategies.

                                  Chip Reed

                                  Managing Director

                                  Atlanta Capital Management Company, LLC

                                  If you lose less money in down markets, you have more assets to grow when things eventually turn around.

                                  Latest advisory blog entry

                                  July 1, 2016 | 10:30 AM

                                  Muni strength Bremains

                                  New York - The outcome of the U.K. referendum reinforces our long-held expectations for low global yields, slow growth, muted inflation and a cautious Fed. These macro factors have provided a strong tail wind for the muni market over the past year. This supportive environment is likely to continue, as the U.K. vote may cast a shadow of uncertainty over the capital markets for some time. Despite low yields, a flatter curve and tight credit spreads, municipals remain an important component of a diversified asset allocation strategy – particularly for investors in high tax brackets, as munis remain attractive versus other taxable fixed-income asset classes.

                                  Post-Brexit shock, munis tracked Treasury yields sharply lower on Friday, resulting in broad market muni indexes posting their strongest one-day total return in three years. The move caps a strong first half of the year. The market is likely to remain well-supported over the near term, aided by continued strong mutual fund flows and favorable supply/demand dynamics throughout July and August.

                                  With compelling relative value, a continued supportive macro backdrop and a broadening consensus of ‘lower for longer,” now is not necessarily the time to take a pause. Rather, the low rate environment reinforces the need to navigate the environment as advantageously as possible – that is, with thoughtful credit analysis, access to inventory and sound execution. Attractive opportunities still exist. And in our opinion, professional management is the key to accessing them.

                                  The U.K. referendum may further dampen an already slow-growth, low-inflation environment, likely keeping investors comfortable with interest-rate-sensitive investments. A sustained appreciation for tax avoidance should keep the municipal market well-supported by a variety of buyers.

                                  Bottom Line: We recommend considering any near-term weakness as an attractive entry point over the remainder of 2016. In a low rate environment, professional management is even more vital to help uncover value and maximize opportunities.

                                  Jon Rocafort

                                  Co-Director of SMA Strategies

                                  Eaton Vance

                                  In a low rate environment, professional management is even more vital to uncover value and maximize opportunities.

                                  Latest advisory blog entry

                                  July 1, 2016 | 10:30 AM

                                  Corporate capital expenditure remains subdued

                                  Boston - When I speak to financial journalists, the question I get most often is, “Why are companies favoring stock buybacks and dividends over capital expenditures?”

                                  I believe there are several components to the answer:

                                  • Investor preference for dividends – Three years ago, I met the management of an Australian transportation company who told me that they had cranes and locomotives that were 30-40 years old and were in need of replacement. However, its stock traded at a discount to companies with high dividends, so it was planning to cut capital expenditures by $200m in order to raise its dividend even though it meant operating with old, inefficient equipment. Over the past couple of years, some equity investors have asked for more capital spending, but companies do not seem to have heard the message yet.
                                  • Activist pressure – Activists have become more aggressive in recent years. Their simple playbook is often to encourage companies to take on debt and buy back stock.
                                  • Sticky hurdle rates – In theory, lower interest rates should lower a company’s hurdle rate for a new project. Anecdotally, I would say this has not happened. When we meet with management teams and ask about the company’s cost of capital, the answer usually sounds something like this, “We calculate a weighted average cost of capital (WACC)1 for our business of 8%. However, we want to earn returns well above that level. We will not green light a new project unless it has an internal rate of return (IRR)2 of 15%.” This answer has been static for several years.
                                  • Regulatory pressures – Regulation has increased in recent years for a number of industries (banks, energy, health care). The spending required to meet this burden has likely diverted resources from more growth-oriented uses.
                                  • Uncertainty – Uncertainty is the enemy of long-term decision-making. With the questions around Brexit, the future of the EU, gridlock in Washington, the U.S. presidential elections, future monetary policy and general economic uncertainty, is it any wonder that companies struggle to commit to long-term capital projects?

                                  Bottom Line: For several years now, markets have been living with the uncertainty of Europe’s political and economic future. Among other reasons, this uncertainty has led to restrained capital spending decisions on the part of corporates. This lack of capital spending has been a key reason for the subdued economic recovery. It will take meaningful fiscal policy and regulatory reform to reverse that trend.

                                   


                                  1 Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is proportionately weighted. All sources of capital, including common stock, preferred stock, bonds and any other long-term debt, are included in a WACC calculation.

                                  2 Internal rate of return (IRR) is a metric used in capital budgeting measuring the profitability of potential investments.

                                  Edward J. Perkin, CFA

                                  Chief Equity Investment Officer

                                  Eaton Vance

                                  This lack of capital spending has been a key reason for the subdued economic recovery.

                                  Latest advisory blog entry

                                  July 1, 2016 | 10:30 AM

                                  It’s too early to buy the Brexit dip

                                  Boston - With the surprise outcome of the U.K. referendum last Thursday, global markets reacted on Friday. The British pound sold off 8%, Treasury yields rallied 18 basis points and gold rallied $60/oz. In equity markets, trading volumes were well above normal and global stocks sold off 5%. But, the real surprise was how orderly things were. I was hoping for more dislocation as ETFs were indiscriminately sold and risk parity funds unwound positions.

                                  Most stocks performed as one would have expected given the surprising “Leave” vote. European and U.K. stocks (in dollar terms) did worst. Financial stocks performed poorly as did U.S. stocks with substantial European exposure. Defensive yield stocks held up well, or rose in some cases.

                                  The VIX, one measure of equity market stress, only rose to 26. By contrast, it hit 28 in February, and 41 last August.

                                  Unlike the many temporary bouts of fear in the market over the past several years, the impact of the Brexit vote seems likely to be more long-lasting. It seems reasonable to expect a recession in the U.K. and, possibly, Europe. Other countries may now hold their own referendums on EU membership, while policymakers must work out all of the logistics of the U.K.’s exit.

                                  Bottom Line: Now is not the time to buy the Brexit dip, largely because volatility in the areas of interest rates, currencies and trade policy seem likely to defer capital spending decisions, which I will address in another post.

                                  Edward J. Perkin, CFA

                                  Chief Equity Investment Officer

                                  Eaton Vance

                                  The real surprise was how orderly things were.

                                  Latest advisory blog entry

                                  June 30, 2016 | 10:00 AM

                                  Dry powder takes the stage as politics drive markets

                                  Boston – When Brexit became a reality last week we were just as stunned as most everyone else. As the markets struggle to process the enormity of the event, we believe it will be important to have cash on hand because politics have become an important market driver going forward.

                                  Brexit is evidence that voters are seeking change—and change they will get. But I have reservations that they will get the growth, jobs and rising incomes they seek having elected a more inward route that limits opportunities and isolates Britain. I see two potential paths for the market right now:

                                  Lower growth expectations in Europe

                                  The first path is a lowering of growth expectations in Europe and, to a lesser degree, for the rest of the world. This is a continuation of a lower for longer rate environment and is supported by the world’s central banks. The results will likely lead to further stretched valuations as investors continue reach for yield.

                                  A more prominent role for fiscal policy

                                  The second path would develop slowly in the months ahead but would be a response in opposition of the Brexit decision for the rest of the world. In this more optimistic scenario, both policymakers and voters would move more decisively towards growth initiatives including greater use of fiscal policy. This path is possible but requires strong leadership, a strong credible message and a move away from populism.

                                  I believe the following three things will influence which path the market ultimately takes:

                                  • A further trend towards exiting the E.U. from other countries. So far the Spanish elections do not indicate further contagion from Brexit as the establishment was voted back in. That’s a good sign but bears watching in the weeks ahead.
                                  • Whether fear builds or recedes and the impact on the U.S. Dollar and rates in the developed markets. Dollar strength and negative rates will lead to market instability and will pressure China’s ability to maintain stability of the yuan. This would have broader negative implications for global markets, particularly emerging markets, which have been somewhat insulated from the Brexit fallout.
                                  • The outcome of the U.S. election. Do we follow Britain and choose protectionism or does the political establishment move closer to the center to deliver necessary change to reduce inequality and polarization?

                                  Bottom Line: It’s a lot to ask for but if we make it through the first two steps in the months ahead I will be more willing to use cash to buy the dips. For now we sit tight with our cash on hand with the flexibility to ride out this period of uncertainty.

                                  Kathleen Gaffney, CFA

                                  Co-Director of Diversified Fixed Income

                                  Eaton Vance

                                  Brexit is evidence that voters are seeking change—and change they will get.

                                  Latest advisory blog entry

                                  June 29, 2016 | 2:00 PM

                                  When laddering bonds, shorter has gotten sweeter

                                  New York – We are often asked to recommend a ladder range. Our recommendation is a generic one that reflects our views on the shape of the yield curve and the relative returns available. Of course, individual client needs, risk-tolerances and objectives should obviously take precedence in selecting a ladder range. For quite some time, we’ve preferred the 5-15-year range, but that is now changing. Today, we see the most value in the 1-14 year range.

                                  What’s behind our change? The yield curve has flattened with short rates rising and longer rates coming down. When we recommended the 5-15, it was in anticipation of this happening. The table below shows the change in AAA yields from 01/04/2016 through 06/28/2016:

                                    AAA yields
                                  Maturity 1/4/2016 6/28/2016 Change
                                  1 Year 0.5 0.52 0.02
                                  3 Year 0.99 0.65 -0.34
                                  5 Year 1.26 0.84 -0.42
                                  7 Year 1.54 1.03 -0.51
                                  10 Year 1.92 1.29 -0.63


                                  Source: MMD Thompson Reuters

                                  Yields have declined the most out the curve while 1-year yields are actually higher than they were at the beginning of the year. Now that this shift has occurred, we find more value in the short end of the yield curve. Holders of existing 5-15 year ladders have benefited from this and we are not recommending they make any changes.

                                  With the shape of the curve as it is, we now see the 1-14 year range as the best relative value for new money investors. Compared to the 5-15 A-rated ladder, the 1-14 A-rated ladder offers 85% of the yield (1.44%/1.69%) for 81.5% of the interest rate risk (5.22/6.40). Starting at the 1 year maturity makes a lot more sense now that short rates have risen and by going out to 14 years, the longest yielding bond in the ladder still will return roughly 80% of the yield available in the 30-year maturity.

                                  Bottom Line: The 1-14 year range is our new preferred range. With the curve flattening, for ladders at least, shorter has gotten sweeter.




                                  The information contained in this Blog is general in nature and is intended to describe the Laddered investment discipline. The discussion contained in this Blog is for informational purposes only and should not be construed as tax or legal advice. An investor should consult a tax professional concerning their specific situation before making any financial decisions. About Risk: Corporate laddered investments in corporate debt obligations are subject to the risk of nonpayment of principal and interest. Changes in economic conditions or other circumstances may reduce the capacity of the party obligated to make principal and interest payments on such instruments and may lead to defaults. Such nonpayments and defaults may reduce income distributions. The value of a debt obligation also may decline because of concerns about the issuer's ability to make principal and interest payments. In addition, the credit ratings of income securities may be lowered if the financial condition of the party obligated to make payments with respect to such instruments changes. Past performance is no guarantee of future results.

                                  Ratings, which are subject to change, apply to the creditworthiness of the issuers of the underlying securities and not to the Fund or its shares. Credit ratings measure the quality of a bond based on the issuer’s creditworthiness, with ratings ranging from AAA, being the highest, to D, being the lowest based on S&P’s measures. Ratings of BBB or higher by S&P or Fitch (Baa or higher by Moody’s) are considered to be investment-grade quality. Credit ratings are based largely on the ratings agency’s analysis at the time of rating. The rating assigned to any particular security is not necessarily a reflection of the issuer’s current financial condition and does not necessarily reflect its assessment of the volatility of a security’s market value or of the liquidity of an investment in the security. Holdings designated as “Not Rated” are not rated by the national ratings agencies stated above.

                                  Investment advisory services offered by Eaton Vance Management, an SEC registered investment adviser.

                                  Evan Rourke, CFA

                                  Municipal Portfolio Manager

                                  Eaton Vance

                                  Holders of existing 5-15 year ladders have benefited from a flattening of the yield curve and we are not recommending they make any changes.

                                  Latest advisory blog entry

                                  June 28, 2016 | 10:30 AM

                                  A silver lining to the Brexit sell-off

                                  New York - Judging by Friday’s volatility, it seems most investors (including us) were incorrect in believing that the United Kingdom (U.K.) would vote to stay in the European Union (EU). We find it perplexing that the U.K. voted against its own economic interests, given that there were other methods available to potentially alleviate the EU’s stifling bureaucracy and governance.

                                  However, we’ve always said it doesn’t matter what should be. The only thing that matters is what happens, and what happened is that the U.K. voted to leave the EU.

                                  Diversifiers are doing their job

                                  With the stock market’s volatility following the vote, it’s important to point out that what we view as “diversifying assets” have, indeed, been acting as diversifiers. They may appear somewhat impotent within the context of a rout in equities, but they are doing what we hoped they would do: U.S. Treasurys, gold and high-yield municipals were all up on Friday.

                                  Meanwhile, our concerns regarding the euro continue to prove correct. Similarly, our total avoidance of Japan appears prescient.

                                  Investor jitters intensify

                                  Despite the near-term volatility, we continue to believe that many investors (key word: investors) are overly risk-averse and too income-myopic. An increasing number of bonds carry negative interest rates, and outflows from U.S. equity investments are larger than those seen 2008-2009. These and other similar data seem to indicate that investors were already extraordinarily, perhaps historically, risk-averse even before Brexit. The Brexit vote seems likely to further exacerbate investors’ fears.

                                  The extreme levels of fear suggest to us that true investors with multiquarter time horizons are looking at a very attractive period in which to invest in equities. We continue to believe that an earnings-driven, price/earnings-compression bull market will ultimately be the story for 2016-2017.

                                  Opportunities may exist for those willing to swim against the tide

                                  Investors are scared and probably want to hear portfolio managers echo their fears. It sounds quite “smart” right now to say one should be cautious, that the current environment is unprecedented and that taking risk these days is foolish given the extreme uncertainty.

                                  However, we think joining that chorus may be a disservice to investors. We prefer to dispassionately review and interpret the data and invest using a risk-aware, contrarian strategy that has been successful over many market cycles, many economic cycles and many highly unusual macro events like Brexit.

                                  Richard Bernstein

                                  CEO and CIO

                                  Richard Bernstein Advisors, LLC

                                  The extreme levels of fear suggest to us that true investors with multiquarter time horizons are looking at a very attractive period in which to invest in equities.

                                  Latest advisory blog entry

                                  June 27, 2016 | 9:30 AM

                                  Loan market takes Brexit in stride

                                  Boston – Direct fundamental implications resulting from Brexit are limited for the U.S. senior secured corporate loan market. Indeed, the “Leave” vote does not in one day alter the solid state of credit risk underlying the vast majority of loan issuers today. Nor is it a nonfactor altogether; Brexit will almost certainly drive technical factors in the immediate term. To be sure, loan prices have adjusted modestly lower today – evidence of an active and functioning secondary market. At the same time, loans have held their ground better than the equity and high-yield markets, yet again exhibiting the lower volatility profile of this asset class.

                                  Importantly, while loan prices are quoted lower today, the market is experiencing thin trading volumes overall. There are active buyers in the market looking for opportunity, very few sellers, and there is no sign of panic or major selling pressure. Rather, secondary market tone appears normal, and there’s good reason this may continue. For one, retail funds aside, the vast majority of this market is held by CLOs and other strategic, long-term institutional investors. And in the retail camp, funds have dwindled to their lowest market share in years – now in the 10% range – with most funds holding significant cash positions as a result of recent inflows and loan repayments. As a result, renewed retail outflows wouldn’t necessitate selling in many cases. Meantime, the new-issue forward calendar remains light, and is likely to continue that way in the weeks ahead.

                                  On market composition, recall that U.S.-based companies account for 85% of the S&P/LSTA Leveraged Loan Index, with just 2.5% in U.K.-based companies. While Brexit will take a long time for Europe and the global economy to digest – literally years, with potentially significant implications – here and now, the issue means little for the credit health of issuers in the U.S senior secured loan market. Aside from elevated price volatility in the short run, our intermediate- to long-term conviction in the stability of the asset class remains well intact.

                                  Bottom Line: The loan market is taking this historic referendum in stride. We are cautiously optimistic that this will continue to be the case in the weeks and months ahead. Uncertain times often present opportunities, and we’ll be watching for them. In the meantime, we remain comfortable with our strategy’s positioning. We reviewed our non-U.S. holdings several weeks ago in anticipation of the impending Brexit vote, determining that there was very little exposure to credits that we believe would be adversely impacted by an exit vote. We will, of course, build any evolving expectations into our analysis of individual credits and act accordingly.




                                  An imbalance in supply and demand in the income market may result in valuation uncertainties and greater volatility, less liquidity, widening credit spreads and a lack of price transparency in the market. Purchases and sales of bank loans in the secondary market generally are subject to contractual restrictions and may be subject to extended settlement periods. Investments in income securities may be affected by changes in the creditworthiness of the issuer and are subject to the risk of nonpayment of principal and interest. Investments in foreign instruments or currencies can involve greater risk and volatility than U.S. investments because of adverse market, economic, political, regulatory, geopolitical or other conditions.

                                  Christopher Remington

                                  Director of Income Product and Portfolio Strategy

                                  Eaton Vance

                                  Aside from elevated price volatility in the short run, the stability of the asset class remains well intact.

                                  Latest advisory blog entry

                                  June 24, 2016 | 3:40 PM

                                  Reasons for caution (and cautious optimism) for post-Brexit Europe

                                  Montreal - Friday’s sell-off following the Brexit vote improved the valuation of European equities relative to global markets, and offered us an opportunity to reduce our underweight exposure to the sector. We are still cautious on Europe -- a lot of uncertainty comes with the historic referendum. We can expect economic growth to slow in the current quarter as corporate confidence weakens on both sides of the English Channel, with reduced employment and investment growth in the near-term.

                                  However, there are also reasons for cautious optimism. For example, we believe the parties involved will want to renegotiate trade deals with as little disruptions as possible. Moreover, we believe the Bank of England and ECB are ready for concerted interventions to make sure there is enough liquidity in the economy and financial markets. In addition, it is possible the BoE will restart its QE program, but it also has other accommodative measures in its toolbox, such as corporate bond purchases and SME loans securitization.

                                  The depreciation of the pound will benefit the export sector, which could help offset any weakness in the domestic economy. While there is a lot of uncertainty around the overall impact Brexit will have on the UK economy, the Black Wednesday experience of September 1992 suggests the economy could recover after an important devaluation of the pound.

                                  The European economic recovery has been ongoing despite weaker growth globally, as improving domestic demand supports overall GDP growth. We don’t believe the impact on the consumer will be big enough to derail the progress made by European households in recent quarters. Loose financial conditions, combined with a central bank that is ready to act if necessary, should be enough to avoid a sharp economic downturn. Also, government fiscal positions in the EU have improved amid extremely low interest rates and stronger economic growth. As such, it is possible that elected officials could help support economic growth with fiscal stimulus programs.

                                  With regard to valuation and sentiment, European equities are not cheap, with a forward price-to-earnings (P/E) multiple of 14x. However, the relative valuation to global equities has become more attractive in recent months and currently stands below its 10-year average.

                                  Bottom Line: For all of the above reasons, we believe the sharp correction in equity markets today represents a good opportunity to reduce our underweight exposure to Europe in our global and international equity portfolios.

                                  Robert Brunelle, CFA

                                  Senior Vice President

                                  Hexavest

                                  The sharp correction in equity markets represents a good opportunity to reduce our underweight exposure to Europe.

                                  Latest advisory blog entry

                                  June 24, 2016 | 3:15 PM

                                  A search for value in Brexit’s wake

                                  Boston - Uncertainty reigns over the markets. This theme, along with a general lack of value, has concerned us. However, both typically don’t go hand in hand. The global economy has been in the hands of central bankers since the financial crisis, with little to show for their efforts other than overvalued markets and a rise in populism amid increased inequality. Asset owners have benefited far more greatly than labor providers. This shifting trend is not shifting fast enough. Brexit is a proof statement that politics and policy will need to move more decisively toward a real and durable solution.

                                  Yesterday’s results told us that the populace is hungry for change, but, more importantly, for who they think can deliver it. In its eyes, it is not the establishment. New rules will apply, and creativity will be key. Recent sit-ins in the U.S. House of Representatives reflect a shift in strategy and approach, and a recognition of unrest.

                                  These are big issues. But when you boil it all down, it is about growth. Monetary policy:

                                  • Has failed, in the sense that it has reached its end.
                                  • Was intended to create confidence for the world’s capital markets. It worked.
                                  • Kept the markets alive with additional stimulus, but it eliminated value.
                                  • Pushed yields to levels that cause more pain and distortion than benefit. Savers were hurt. Companies ceased investing.

                                  The stimulus never reached the real economy and left many behind who did not have the ability to invest. This is clearly not sustainable and why we are seeing the rise of populist movements around the world.

                                  What is the answer?
                                  A solution to the lack of growth and the inability for it to flow through to the populace is a real rise in income from higher wages and an associated virtuous cycle. This is good inflation. There has also been increased talk around helicopter money, which will likely grow louder. This would, again, be inflationary.

                                  As value investors with flexibility and patience, we look for what the market might be missing to find the best opportunities. No one expects inflation. No one expects global growth to resume any time soon. Brexit puts authorities on notice, and will force them to respond.

                                  Sectors to watch
                                  We believe sectors that will outperform as growth and inflation expectations change will be cyclical, commodity-related and those that benefit from a weaker U.S. dollar. Those are the values we continue to hold as we ride out this period of adjustment and look for global leadership to bring us into a bold new world. It will not be a straight line, and we will use volatility to our advantage.

                                  Bottom Line: Politics takes more time to work out than a balancing in the oil markets. There is no reason to rush in, but make no mistake – this will be an environment in which dry powder and flexibility will be important.

                                  Kathleen Gaffney, CFA

                                  Co-Director of Diversified Fixed Income

                                  Eaton Vance

                                  Henry Peabody, CFA

                                  Diversified Fixed Income Portfolio Manager

                                  Eaton Vance

                                  Sectors that will outperform as growth and inflation expectations change will be cyclical, commodity-related and those that benefit from a weaker U.S. dollar.

                                  Latest advisory blog entry

                                  June 24, 2016 | 3:00 PM

                                  Will Brexit be a wake-up call for Europe?

                                  London - Now that Britain has opted to leave the European Union, the referendum highlights the structural and cultural flaws of the European project in its current form, i.e., the worst of both worlds for EU members – a lack of sovereignty, but not all the way toward achieving a fully integrated fiscal union. Over the long term, the exit of Britain from the regulatory and nondemocratic EU could boost economic freedom in the U.K. and, hence, long-term growth. However, the end of the speculation over Britain’s fate hardly changes the unfortunate reality that Europe is already in crisis and many challenges remain:

                                  • Europe’s aging demographics.
                                  • Sluggish economic growth.
                                  • High unemployment in the southern Europe.
                                  • The negative rates policy of the European Central Bank.
                                  • The worsening migrant crisis.
                                  • Security and terrorism.

                                  The real question is whether the passions on display from both sides of the EU referendum debate will be a strong enough wake-up call for change?

                                  To be sure, there are still plenty of hurdles to clear. Other parties in other countries could energize voters to reject the EU and its bureaucracy. The rise of populist parties and support across the region has already revealed a real desire – and perhaps a real need – for substantive change.

                                  The credit markets had been pricing in a 75% chance of the U.K. remaining in the EU. Yesterday’s vote to leave will obviously increase market volatility and take an immediate toll on the British pound sterling (GBP). This weakness will also filter to EUR currency, as well as other risk assets.

                                  It is important to understand that volatility can always bring with it numerous opportunities, so we believe the "Leave" vote signals a good entry point to allocate capital into income asset classes, as well as individual high-yield bonds and leveraged loans.

                                  Bottom Line: A Leave vote is not the end of the story, but only the beginning. Market volatility will be fueled by a further weakening European Union. For example:

                                  • Italy’s populist “5-star movement” has achieved support in recent elections and recently called for a national referendum on whether Italy should leave the EU.
                                  • German Chancellor Angela Merkel's approval rating in Germany is at a 5-year low.
                                  • Spanish political party, Podemos, which did not exist 10 years ago, could do well in the upcoming election in Spain.
                                  • Le Penn’s party in France looks to be in next year’s presidential elections.

                                  Jeff Mueller

                                  Portfolio Manager, Global Analyst

                                  Eaton Vance

                                  Justin Bourgette

                                  Customized Solutions Portfolio Manager

                                  Eaton Vance

                                  A Leave vote is not the end of the story, but only the beginning.

                                  Latest advisory blog entry

                                  June 24, 2016 | 2:30 PM

                                  Post-Brexit: Don’t bet on a quick resolution

                                  Boston - Yesterday, U.K. voters made the hugely consequential decision to detach from the European Union. Over the past two months, we have been surprised at the complacency in the global equity markets around this possibility.

                                  While the decision brings clarity on the uncertainty of the vote, it also unleashes uncertainty on many fronts:

                                  • Who will the next U.K. prime minister be?
                                  • How long will it take the U.K. to renegotiate trade agreements?
                                  • Will any other countries hold exit referendum votes?
                                  • What happens to the work permit status of Continental Europeans in the U.K.?
                                  • What monetary or fiscal policy response will there be?

                                  Against this backdrop of uncertainty, it seems clear that corporate management teams will be very reluctant to make major investment decisions on capital spending or hiring until they have more confidence in the rules of the road. This will likely lead to a recession in the U.K., and possibly in Europe broadly.

                                  It comes down to how quickly policymakers can respond. The monetary policy response will likely be rapid, but renegotiating trade agreements and passing fiscal stimulus will take longer. It generally doesn’t pay to bet on the nimbleness of bureaucrats.

                                  Bottom Line: In aggregate, our equity portfolios favor quality companies, which we believe gives us a modestly defensive posture. We do not view today’s sell-off as sufficient to add risk.

                                  Edward J. Perkin, CFA

                                  Chief Equity Investment Officer

                                  Eaton Vance

                                  It generally doesn’t pay to bet on the nimbleness of bureaucrats.

                                  Latest advisory blog entry

                                  June 24, 2016 | 1:30 PM

                                  Messy Brexit divorce will likely drive volatility

                                  Boston - The Brexit vote of June 23, 2016 will be remembered as something of a “Dewey Defeats Truman” moment for financial markets, referring to the famously early, incorrect headline of the Chicago Daily Tribune in November 1948. As of 5 p.m. EST on Thursday, financial markets were pricing in a near certainty for the Remain vote, and the pound was trading at 1.50 versus the dollar. With the results in around midnight, the pound had plunged more than 11% to 1.33. It is a sobering reminder of the fallibility of markets, just like the U.S. presidential vote of 2004, when Election Day predictions were for Kerry to beat Bush.

                                  Looking ahead, there are two main areas of focus – the direct effects on the U.K. economy and the impact on financial markets.

                                  The first step for the UK will be for Parliament to accept the vote, and we believe that will happen. Subsequently, the formal “divorce” from the EU will likely be negotiated over the next two years, and we will be watching for how tough the EU negotiators will be about terms of trade. Despite EU policymakers saying they would take a harsh line ex ante, we are already seeing some softer overtures from them. A lot of financial volatility will be driven around that process as it develops.

                                  We will also be watching the actions of central banks, who will likely seek to reassure the markets with liquidity and interventions in the currency markets; we have already heard that the latter was beginning.

                                  Bottom Line: Dramatic price actions are following an historic “wrong call” by the financial markets. We know that markets often overshoot, both on the way down and on the way up, and that the fundamental effects of Brexit will take a long time to play out. Many assets that sold off dramatically overnight have already rebounded notably as we write this. We are looking for the longer-term investment opportunities that the near-term price volatility will offer.

                                  Eric Stein, CFA

                                  Co-Director of Global Income

                                  Eaton Vance

                                  Dramatic price actions are following an historic “wrong call” by the financial markets.

                                  Latest advisory blog entry

                                  June 24, 2016 | 12:30 PM

                                  Brexit adds a layer of uncertainty to markets

                                  Boston – The decision by the U.K. in favor of Brexit adds a layer of uncertainty to global markets. It’s clear that substantive, fundamental impacts on trade and economic growth are likely to take a long time before they become apparent. In the meantime, investors will be driven by an elevated perception of risk and central banks are likely to react accordingly.

                                  Following what is now a well-known script, central banks are likely to respond with renewed measures aimed at keeping financial markets on “Novocain.” The lower returns on capital that many asset classes have experienced in the past couple of years could persist. Investors may have to recalibrate their expectations.

                                  Questions following the referendum are many, but a few that come into focus are:

                                  • What will the ultimate trade terms be between the EU and the U.K.? The EU has an incentive to make them harsh, lest they encourage other countries to take the same path.
                                  • How will other EU countries react, in light of growing public sentiment against staying in the EU? Will other countries hold similar referenda? Elections in France and Germany will be held next year.
                                  • Will this further boost protectionist leanings that are on the rise around the world?
                                  • Will this lead to a greater divergence between U.S. and European economies?

                                  Bottom Line: We won’t know the extent of the real impact of Brexit for years. At the turn of the century, the UK refused to adopt the euro, and dire predictions for the U.K. made at the time did not come to pass. In the near term, fear could drive market volatility, and create compelling buying opportunities. In particular, a sell-off in sectors not directly related to the U.K. – like U.S. corporate credit – could be very attractive in an environment of extended support by central banks.

                                    Payson F. Swaffield, CFA

                                    Chief Income Investment Officer

                                    Eaton Vance

                                    In a sell-off, sectors not directly related to the U.K. – like U.S. corporate credit – could be very attractive.

                                    Latest advisory blog entry

                                    June 24, 2016 | 10:05 AM

                                    Uncharted territory: What Brexit means for global equities

                                    London - The U.K. vote to exit the European Union ushers in a new era of uncertainty that is likely to persist for some time. The significance of this event cannot be overstated from political, economic and social perspectives. This is indeed uncharted territory.

                                    The repercussions of this vote for the future of the European Union could be profound. We are already seeing calls for a similar referendum in the Netherlands and France. Spain has presidential elections this weekend, while Germany, the Netherlands and France will elect their leaders in 2017. Will Angela Merkel, the glue that has held Europe together for the past decade, retain her position to lead the continent through its next challenge? Or will populism and nationalism splinter the frail union?

                                    What’s next?
                                    The U.K. has two years to negotiate the terms of its exit from the EU. During this period, we believe:

                                    • Companies will reduce investment and hiring, as they await the new rules to be written.
                                    • Consumers in Europe will likely curtail spending in the uncertain environment.
                                    • This will lead to a recession in Europe as a base case, while it is premature to predict whether this predicates a global recession.

                                    In the coming hours and days, we will see various central banks comment on their commitment to do everything within their powers to promote stability. However, the market is already pessimistic about the diminishing effectiveness of each central bank’s incremental initiative. We are likely to see fiscal stimulus from governments to counteract the drops in corporate and consumer spending.

                                    We expect that the relative stability of the US and Japan to be a benefit to returns versus Europe over the near term. From a sector perspective, financials face the greatest uncertainty and headwinds in the near term, as new regulations are negotiated and financial conditions tighten. Health care stocks, which have already underperformed significantly over the past six months, now appear very attractive and should be less affected by the prevailing political and economic uncertainty.

                                    The conditions discussed above are reflected in the share price and currency moves we are seeing in the market today.

                                    Bottom Line: Indiscriminate selling results in mispriced equities, which creates investment opportunities for long-term investors. As in any market environment, there will be winners – companies that are positioned to exploit their competitive advantages in order to grow and gain share at the expense of weaker competitors. In the global equity portfolios, we are focused on identifying and investing in these companies.




                                    Investments in equity securities are subject to stock market volatility. Investments in foreign instruments or currencies can involve greater risk and volatility than U.S. investments because of adverse market, economic, political, regulatory, geopolitical or other conditions.

                                    Chris Dyer

                                    Director of Global Equity, Portfolio Manager

                                    Eaton Vance

                                    The repercussions of this vote for the future of the European Union could be profound.

                                    Latest advisory blog entry

                                    June 23, 2016 | 10:30 AM

                                    Brexit vote may lead to U.S. muni opportunities

                                    The municipal market is taking a pause, due to factors that are both routine and (exceedingly) rare. Summer generally is a high point for bond calls and money being reinvested back into the market. This year, we are seeing the typical bond calls, but we are not seeing typical reinvestment flows into the market, as investors wait for the results of the UK Brexit referendum.

                                    What happens to munis post-Brexit?

                                    The vote has no direct credit impact on U.S. state and local governments, but if the decision is to leave, it could spark a flight to quality among global investors. We believe that munis could be one of the beneficiaries, as the municipal market has been highly correlated with U.S. Treasurys -- the main flight-to-quality investment. The fact that the long end of the muni curve is richly valued relative to U.S. Treasurys would likely not deter investors who perceive it as a safe haven, given the historically low credit risk and diversification of the sector.

                                    Similarly, a vote to remain might result in near-term selling of safe-haven assets. This scenario could temporarily put pressure on muni prices, which have been bid up, partly in anticipation of a flight to quality. However, we believe that any such sell-off is likely to be short-lived: The cash on the sidelines should find its way back into the muni market, in our view, as higher yields draw many investors back in.

                                    Bottom line: The Brexit results could open up some timely opportunities in the U.S. municipal market.

                                    Craig Brandon, CFA

                                    Co-Director of Municipal Investments

                                    Eaton Vance

                                    The vote has no direct credit impact on U.S. state and local governments, but if the decision is to leave, it could spark a flight to quality among global investors.

                                    Latest advisory blog entry

                                    June 22, 2016 | 10:30 AM

                                    Rising interest rates are no death knell for bull market

                                    New York, NY – When Richard Bernstein Advisors (RBA) was formed almost seven years ago, we argued that the U.S. was entering what could be the biggest bull market of our careers. So far, this bull market is the second longest of the postwar period, and we still believe it will ultimately be one for the record books.

                                    We believe market conditions support a continued bull market—but it won’t be driven by falling interest rates as the current bull market has. As rates rise, we anticipate that earnings growth will carry the day as the bull market marches on into 2016 and beyond.

                                    A tale of two bull markets

                                    There are historically two types of bull markets:

                                    • Interest-rate-driven markets are characterized by falling interest rates and expanding P/E multiples. Investors have become very familiar with this type of bull market, and many have come to believe that falling interest rates and expanding multiples are the sole construction of a bull market.
                                    • Earnings-driven-markets are dependent on earnings growth to offset the P/E multiple contraction associated with rising rates. There have been many periods in stock market history when earnings growth improved, interest rates rose, P/E multiples contracted and a bull market continued.

                                    Markets may be shifting towards earnings

                                    The next leg of the bull market could be an earnings-driven phase. We repositioned our portfolios earlier this year to accentuate cyclical sectors because our proprietary research suggests consistent improvement in earnings over the next year or so, and it is conceivable to us that S&P 500® reported GAAP profits toward the end of 2016 or early 2017 could be growing at about 20%. If that forecast proves correct and growth rates improve meaningfully, there’s a good likelihood of an earnings-driven rally.

                                    The Bottom Line: It’s always headline-grabbing to predict a calamitous end to a bull market, and broad range of sentiment data strongly suggests that investors are quite scared. However, we continue to swim against that fearful tide, and our portfolios are positioned for a cyclical rebound in earnings and an earnings-driven bull market.

                                    Richard Bernstein

                                    CEO and CIO

                                    Richard Bernstein Advisors, LLC

                                    The next leg of the bull market could be an earnings-driven phase.

                                    Latest advisory blog entry

                                    June 21, 2016 | 10:30 AM

                                    China: Is the picture all wrong?

                                    Shenzhen, China – Media reports on the Chinese stock market often include an image of an exasperated investor with his hands on his head, standing in front of a stock quotation screen covered in red tickers and prices. We are to infer from that picture the drama and depression of falling stock prices. Problem is, that picture is all wrong. Red is good in China, meaning stocks are gaining value. Green is bad, representing losses.

                                    Such is the case with many financial and economic characterizations in China: They are pictured all wrong.

                                    In China, red is good, green is bad.
                                    Shenzhen Stock Exchange loses value, with prices “in the green.”



                                    Photo Credit: Marshall L. Stocker on a recent visit to China.

                                    On May 9, the People’s Daily, the newspaper of the Chinese Communist Party, published a nearly 15,000 word commentary by an “authoritative person.” The author, widely believed to be empowered by President Xi, wrote that “existing contradictions in the economy have not moderated, and new problems have emerged." In contradicting a popular belief that a one-party authoritative government can quickly implement policy change, the author publicly admitted to the difficulty of implementing economic policy changes. With this May 9 missive, the Chinese Communist Party appears little better at precisely and swiftly implementing policy change than a robust or fractious democracy. This opinion was supported by the “authoritative person’s” admission of previous miscommunication.

                                    Speculation remains as to whether this lengthy, public clarification of economic policies was aimed at settling a policy dispute among China’s executive leaders, or at compelling the lower-level bureaucratic officials to better follow central government dictates.

                                    Bottom line: The picture is clear, however. Policies to address China’s imbalances and improve the allocation of capital are not likely to be any more efficiently implemented by a one-party authoritarian government such as China’s, than by the fractious democracy of a country like India.

                                    In coming weeks, I will address other misconceptions about the Chinese economy and markets, along with key factors that should affect asset returns in the world’s second-largest economy.

                                    Marshall L. Stocker, PhD, CFA

                                    Global Macro Equity Portfolio Manager

                                    Eaton Vance

                                    Red is good in China, meaning stocks are gaining value. Green is bad, representing losses.

                                    Latest advisory blog entry

                                    June 20, 2016 | 10:30 AM

                                    Why investors overreact to market corrections

                                    The short answer, of course, is that it’s human nature, irrational though it may be in many cases:

                                    • Loss aversion: Behavioral finance tells us that fear trumps greed. In other words, most investors dread losses more than they desire gains.
                                    • Recency bias: Recent events trigger hasty decisions, even when such events contradict longer-term trends or investment objectives.
                                    • Overreaction bias: Most investors place too much emphasis on negative, sensational news headlines, leading to indiscriminate selling.
                                    • Herd behavior: Investors take an “everyone is selling” mentality and follow suit because they fear being the last one to sell.

                                    These all-too human tendencies were exacerbated by the 2008 credit crisis, which left many investors permanently scarred. This debacle, caused by massive losses on subprime loans, sparked the worst market collapse in more than 75 years. Although nearly eight years have passed since then, the carnage still remains fresh in investors’ minds, with many fearing that the next recession and market downturn will be just as bad.

                                    More often than not, such fears are unfounded. For example, there is growing concern (and press coverage) these days that bank loans to the energy sector could pose a serious threat to the economy and financial system – even though banks generally do not have excessive E&P exposure, are better capitalized and adhere to stricter counterparty risk measures than they did prior to the 2008 crisis.

                                    Investors with long time horizons are best positioned to tolerate market volatility and earn attractive returns over time, but instead, many behave irrationally and sell during corrections to limit their short-term losses.

                                    Bottom line: Market volatility and corrections are many investors’ biggest fear. However, we believe a bigger fear should be missing out on the market recoveries that typically follow the corrections. Our research shows that when disciplined, data-driven investing gives way to biased, emotion-driven investing, portfolio performance suffers.

                                    This is the first in a series of blog posts on volatility. In future posts, we will discuss how a simple balanced portfolio of stocks and bonds can help investors stay on track and maximize their long-term return potential.

                                    Bernie Scozzafava

                                    Diversified Fixed Income Portfolio Manager

                                    Eaton Vance

                                    Dan Codreanu

                                    Senior Diversified Fixed Income Quantitative Analyst

                                    Eaton Vance

                                    Investors with long time horizons are best positioned to tolerate market volatility and earn attractive returns over time …

                                    Latest advisory blog entry

                                    June 17, 2016 | 2:30 PM

                                    It’s hard to say goodbye (to very low interest rates)

                                    As of yesterday, the Fed chose to leave interest rates unchanged, and due to several considerations, it’s going to be challenging for them to raise rates anytime soon. For starters, the recently released payroll number was disappointing. While Fed Chair Janet Yellen was somewhat optimistic about the chances of the labor market recovering, she is obviously concerned. The possibility of Britain leaving the European Union following the country’s June 23 referendum – the so-called “Brexit” – poses a novel risk that complicates their decision-making.

                                    At the same time, the Fed continues to lower where they think the neutral real fed funds rate should be in the medium-term. Part of that trend is due to what’s going on in the rest of world – with zero or negative yields, it’s tough for the Fed to tighten policy.

                                    So, what will the Fed’s next move be? Yellen said a July rate hike was not impossible, but that’s not exactly a strong statement, given that a couple weeks ago she thought June or July would most likely bring a hike. However, if Brexit is voted down and the data improves, September would seem to be the most likely scenario for a hike – enough time before the U.S. election and far enough away from Brexit vote. If Brexit becomes a reality, though, we can anticipate Fed hikes being pushed way out.

                                    The Fed is in a tough spot as they mull their next move. Three months ago, there was talk of a strengthening labor market and weak economic growth, but that has flipped. Now, there’s strong economic growth and a weak labor market. The Fed needs to decide if the recent numbers are just a blip, or if they represent a trend in employment.

                                    Bottom line: The median rate hike prediction among FOMC members is still for two rate hikes this year. But given recent developments for payroll numbers, economic growth and Brexit, it appears unlikely – but not impossible – that the Fed will be able to do that.

                                    Eric Stein, CFA

                                    Co-Director of Global Income

                                    Eaton Vance

                                    Andrew Szczurowski, CFA

                                    Portfolio Manager, Global Income Group

                                    Eaton Vance

                                    Three months ago, there was talk of a strengthening labor market and weak economic growth, but that has flipped.

                                    Latest advisory blog entry

                                    June 16, 2016 | 10:30 AM

                                    Equity Update: Three ideas to consider now

                                    Economic softness is back

                                    Notwithstanding the Fed’s insistence that the U.S. economy is performing well, news from the corporate sector suggests otherwise. The transportation industry offers a leading view on the health of the economy, and the rail data has again softened with intermodal (i.e., consumer goods) car loadings down 12% year-over-year. Some of this weakness can be attributed to a difficult comparison from a year ago, but there is clearly underlying weakness on the rails. Other industrial companies at a recent conference uniformly described the U.S. economy as growing at a very sluggish rate, and recent PMI* data also supports this view.

                                    A Trump presidency might be good for equities

                                    Like a good stock, Donald Trump has continually “beaten and raised” expectations over the past four quarters. Although the consensus continues to believe he is a long shot to win, thoughtful investors must consider all feasible outcomes. Conventional wisdom has it that a Trump presidency would be a disaster for risk markets. But we’re not convinced. The nature of the U.S. presidency is that it is difficult to do much without the support of Congress, and a Trump victory would likely coincide with the Republicans maintaining majorities in both houses. We expect corporate tax reform to be an early priority. We can also envision a scenario where U.S. corporate tax rates are slashed, $2 trillion of overseas cash is repatriated at low taxes and a major infrastructure spending package is passed.

                                    Technology poised to drive growth across economic sectors

                                    We are on the verge of a wave of innovation across the economy. At a multi-industry investment conference in New York recently, technology and innovation were emphasized heavily in nearly every company presentation. An oil and gas company discussed its efforts to improve horizontal drilling techniques, drive down costs and make attractive returns at a $40 oil price. A credit card company discussed the prospect of using mobile payments to bring its services to the two billion unbanked people around the world. The next surge of innovation will likely be in the industrial economy, particularly the areas of robotics, artificial intelligence and 3-D printing.

                                    Bottom line: Valuations are full, negative catalysts are looming and the economy looks softer than most observers perceive it to be. With these concerns in mind, over the medium term, the bull market may continue as fiscal policy and technological innovation potentially drive growth in the economy.




                                    * The Purchasing Managers' Index (PMI) is an indicator of the economic health of the manufacturing sector.

                                    Edward J. Perkin, CFA

                                    Chief Equity Investment Officer

                                    Eaton Vance

                                    We are on the verge of a wave of innovation across the economy.

                                    Latest advisory blog entry

                                    June 15, 2016 | 4:00 PM

                                    How loans could outpace bonds if rates rise or just move sideways

                                    Yogi Berra famously noted that predictions are hard – especially about the future. The sluggish, uneven growth of the post-recession years has made predicting future rate hikes even harder than Yogi could have predicted.

                                    But, we don’t have to go far out on a limb to believe that the era of large interest-rate declines is behind us and that the most likely paths for rates are up or sideways. We believe investors could benefit from reviewing how their fixed-income portfolios might fare in different environments.

                                    In that spirit, we compared how floating-rate loans might perform versus traditional bonds under different interest-rate scenarios, as illustrated in the chart below, which uses the basic bond math of duration to illustrate the potential impact on total return over one year. Duration measures the sensitivity of bond prices to changes in interest rates. For example, if rates rise, prices of bonds with longer duration – like the 5.5-year duration of the Barclays U.S. Aggregate Bond Index (the Index) – will move further down than prices of loans, which have a duration of 0.1 years, thanks to the fact that their yields float upward in tandem with short-term rates.

                                    If we assume rates will stay close to flat, the yield advantage of loans works out to a 3.6 point average in return. If rates increase by 100 basis points (bps), the differential between loans and the Index widens to 10 points. Falling rate scenarios (which are much less likely, in our view) turn the advantage to the Index after a decline of more than 50bps.

                                    Bottom Line: Compared with traditional bonds, loans offer a yield advantage in flat rate environments like today’s, and the potential for higher total returns when rates rise. These features can be very valuable for fixed-income investors – especially those with portfolios weighted toward traditional bonds.




                                    An imbalance in supply and demand in the income market may result in valuation uncertainties and greater volatility, less liquidity, widening credit spreads and a lack of price transparency in the market. Bank loans are subject to prepayment risk. Purchases and sales of bank loans in the secondary market generally are subject to contractual restrictions and may be subject to extended settlement periods.

                                    Scott Page, CFA

                                    Co-Director of Bank Loans

                                    Eaton Vance

                                    Craig Russ

                                    Co-Director of Bank Loans

                                    Eaton Vance

                                    We believe investors could benefit from reviewing how their fixed-income portfolios might fare in different environments.

                                    Latest advisory blog entry

                                    June 14, 2016 | 2:30 PM

                                    Illinois’ woes mask fundamental strengths

                                    The move by S&P and Moody’s to downgrade Illinois to BBB+/Baa2 does not come as a surprise, given the long-running political gridlock between the Republican governor and the Democratic legislature.

                                    Despite the headlines, it is important to keep two facts in mind: Illinois is a large state with a broad economic base, and its bonds are being sharply discounted. We believe the state’s bonds represent significant relative value compared with other BBB-rated debt. Illinois’ bonds trade at a spread of 170 to 180 basis points (bps), compared with 80bps for other BBB issues.

                                    Illinois is struggling from intertwined problems of budget deficits, pension liabilities and political impasse:

                                    • This budget deficit is expected to grow to more than $6 billion for fiscal 2017, which begins on July 1. This is largely due to the loss of $4 billion in revenue after the January 2015 sunset of temporary individual and corporate income tax rate increases, which had been in effect since 2011.
                                    • The Illinois pension system is the most underfunded of all the states, with $111 billion in unfunded liabilities, compared with its annual budget of $32 billion.
                                    • Governor Bruce Rauner has refused to consider tax hikes unless accompanied by expense cuts and pension reform initiatives. The legislature has insisted on closing the budget gap mainly through tax increases.

                                    With the recent downgrade and the fiscal crisis in Puerto Rico, comparisons are inevitable – and also misplaced. Consider:

                                    • Illinois’ GDP of $772 billion is the fifth largest of the states – an economy bigger than the Netherlands, and more than seven times as large as Puerto Rico’s. Illinois is home to 34 Fortune 500 companies, placing it fourth among all states.
                                    • Per capita income is above the U.S. average of $30,417 (versus $11,241 for Puerto Rico), and the unemployment rate is 6.6% (versus 11.7% for Puerto Rico).
                                    • In Puerto Rico, total debt, unfunded pensions and other postemployment benefits equal 90% of GDP; in Illinois, this ratio is just 29%.

                                    The chart below shows that Illinois personal and corporate income taxes remain low relative to surrounding states and, therefore, could be increased to address the state’s structurally unbalanced budget. As Moody’s noted, “The state’s challenges are largely political. With a consensus in place, Illinois could quickly provide for fiscal balance in the coming fiscal year, given the breadth of its economic base.”

                                    Illinois’ taxes are low compared with neighbors – and a big potential revenue source.

                                    Bottom line: We believe that Illinois has the ability to solve its financial challenges, and that its bonds are significantly cheaper than other BBB-rated credits. The most apt comparison is not with Puerto Rico, but with California, which in 2004 was the last state to be rated as low as Illinois. California made the difficult political decisions to balance its budget and is now rated AA-. Illinois needs to exercise the same political will.




                                    Credit ratings are categorized using S&P. If S&P does not publish a rating, then the Moody's rating is applied. Ratings, which are subject to change, apply to the creditworthiness of the issuers of the underlying securities and not to the Fund or its shares. Credit ratings measure the quality of a bond based on the issuer's creditworthiness, with ratings ranging from AAA, being the highest, to D, being the lowest based on S&P measures. Ratings of BBB or higher by S&P or Fitch (Baa or higher by Moody's) are considered to be investment-grade quality. Credit ratings are based largely on the ratings agency's analysis at the time of rating. The rating assigned to any particular security is not necessarily a reflection of the issuer's current financial condition and does not necessarily reflect its assessment of the volatility of a security's market value or of the liquidity of an investment in the security.

                                    William Delahunty, CFA

                                    Director of Municipal Research

                                    Eaton Vance

                                    With the recent downgrade and the fiscal crisis in Puerto Rico, comparisons are inevitable – and also misplaced.

                                    Latest advisory blog entry

                                    June 14, 2016 | 11:00 AM

                                    Impending Brexit vote: It ain’t over till it’s over

                                    The upcoming Brexit vote on June 23 is shaping up to be a close race, with recent polls putting the “Leave” vs. “Remain” camps virtually neck-and-neck. While the “Leave” campaign has been gaining ground, betting markets continue to show a 70% chance of a Remain vote. Here are three points to consider when weighing the possible outcomes:

                                    • Status quo bias can be strong
                                      When compared with other referendums, such as in Scotland or Quebec, the status quo bias has been very strong. These kinds of votes are emotionally charged with plenty of rhetoric on either side, but at the end of the day people have tended to vote for what they know - and in the case of Brexit, a “remain” vote represents a desire to stick with “the devil you know.”
                                    • Too close to call
                                      In terms of market and portfolio implications, the race is so close that there don’t appear to be any clear indicators in terms of portfolio positioning. However, there could be opportunities ahead of the June 23 referendum if asset prices and fundamentals disconnect. Certainly once we know the outcome, there may be opportunities to reassess portfolio positioning.
                                    • Impact of “Leave” vote won’t be immediate
                                      Even if the U.K. votes to leave, there will be at least a two-year negotiation with the EU on how the separation will play out. No country has ever left the EU, so the impact of such a decision is uncertain. If Britain opts to remain, it’s likely that the issue will come up again in U.K. politics.

                                    The Bottom Line: It’s a close race and the outcome will have far-reaching implications for the U.K. and its political system as well as other countries in the EU.

                                    Eric Stein, CFA

                                    Co-Director of Global Income

                                    Eaton Vance

                                    Latest advisory blog entry

                                    June 13, 2016 | 10:15 AM

                                    Yellen Expected to Stand Pat at June FOMC Meeting

                                    While we don’t expect to see any policy changes at the upcoming FOMC* meeting, all eyes will be on the accompanying statement, the statement of economic projections, and Chair Janet Yellen’s press conference. We anticipate that the press conference will focus on two key areas:

                                    • The labor market’s weak showing
                                      After coming off of a very weak payroll print, the expectation is that Chair Yellen will be very focused on whether or not she expects the labor market to improve going forward. Expect lots of questions on how much improvement she needs to see in the labor market to trigger a July interest rate hike.
                                    • The upcoming Brexit vote
                                      The June 23 Brexit vote is fast approaching, and while there was some market chatter that a good payroll number could support a June hike, we expect the Fed to wait until after the Brexit vote to make that decision.

                                    The Bottom Line: We expect the focus of the press conference to be on the labor market and the Brexit vote. If the labor market improves and the U.K. votes to remain in the EU, there’s certainly a chance of a rate hike in July.




                                    * The Federal Open Market Committee (FOMC) is the monetary policymaking body of the Federal Reserve System.

                                    Eric Stein, CFA

                                    Co-Director of Global Income

                                    Eaton Vance

                                    Latest advisory blog entry

                                    June 10, 2016 | 10:15 AM

                                    There’s still value in European single- B credits following stimulus-driven rally

                                    Wednesday marked the formal beginning of the European Central Bank’s (ECB) Corporate Sector Purchase Program (CSPP). Credit spreads in Europe have, however, already tightened considerably in anticipation of the program’s implementation. As a result, investment in European high yield bonds now requires an even more selective approach. Single B credits, in our view, stand out as still offering value.

                                    While the positive tone across most markets since March has seen a rally in most risk assets, European credit has been a standout performer. Since the CSPP was announced on March 10, 2016, yields on euro-denominated investment grade bonds have dipped as low as 1%, and euro-denominated BBB spreads have tightened by more than 20% (as at June 7, 2016).

                                    The spill-over effect into sub investment grade credit has seen European high yield spreads tighten significantly, with euro-denominated BBs tightening 130 basis points (bps) and euro-denominated Bs tightening 120bps. While the absolute moves are similar in quantum, the percentage moves show the stark outperformance of BBs (BBs have tightened by 30% while single Bs have tightened by 17%). Although the ECB has no plans to purchase high yield bonds, euro-denominated BBs have been the sweet spot for spread tightening because “investment grade” investors have reached down the credit rating spectrum for yield.

                                    Given the aforesaid move in spreads, the question now is: what will happen now that the ECB is actually purchasing bonds? History may provide a useful guide here. Both the Public Sector Purchase Program (PSPP) and the CBPP followed similar paths of spread tightening in the period from the announcement date until the date of implementation. The same could be said for corporate bonds in Japan post corporate quantitative easing. However, once these bond buying program were actually implemented, spreads either remained flat or started widening. If previous asset purchase program are anything to go by, the bulk of spread tightening in Europe has probably already occurred – ahead of a single bond actually being purchased by the central bank.

                                    Bottom Line: Despite the fact that this week marks the first time the ECB will actually be buying corporate bonds as part of the CSPP, spreads may have already made their big move tighter. It is difficult to draw definitive conclusions given the small sample size – and the ECB could certainly increase stimulus to drive spreads tighter in the future – but duration and euro BB risk could be primed for underperformance going forward. Euro-denominated single Bs, however, still look to offer value.

                                    Jeff Mueller

                                    Portfolio Manager, Global Analyst

                                    Eaton Vance

                                    Investment in the European high yield bond now requires an even more selective approach with single-B credits, in our view, offering value.

                                    Latest advisory blog entry

                                    June 9, 2016 | 9:45 AM

                                    What is low volatility signaling?

                                    After rising earlier this year, market volatility has receded to low double digits: The VIX, a commonly used measure of stock market volatility, was around 14 as of this writing (see chart below). When volatility ebbs to such historically low levels, it’s typically a sign that some degree of investor complacency has crept into the market. Complacency, in turn, is often a sign that market volatility, particularly downside volatility, may pick back up again in the relatively near future.

                                    On the other hand, dividend yields for the S&P 500 Index and major overseas indexes have climbed modestly over the past year, even as interest rates have declined. (The 10-year U.S. Treasury yield was well below 2.00% as of this writing.) This could imply that the market is already “baking in” some of the challenges in today’s environment. If so, the market could demonstrate more resilience than some investors expect in the coming months.

                                    The resolution of this apparent dissonance could come from a number of different sources, including interest rates rising in the period ahead (as seems likely at this point), energy and commodities continuing to trend higher, the dollar moving higher (or lower), and uncertainty leading up to the November election.

                                    Bottom line: With so many variables at play right now, only time will tell how the market behaves in the second half of 2016.

                                    Michael Allison, CFA

                                    Equity Portfolio Manager

                                    Eaton Vance

                                    After rising earlier this year, market volatility has receded to low double digits.

                                    Latest advisory blog entry

                                    June 8, 2016 | 10:30 AM

                                    Yellen Hints Rates Won’t Rise—At Least for Now

                                    Janet Yellen talked us off the ledge yesterday. She reminded a post-payrolls market that all is not lost, while recognizing that the Fed has played a supporting role in one of the economic risks that she specifically called out – that “investor perceptions and appetite for risk can change abruptly.” Just ask the currency and credit markets about volatility in recent weeks in response to wild shifts in Fed expectations.

                                    The Chair offered an optimistic view of the economy from the context of her background as a labor economist, adding that with the neutral funds rate rather low, the current policy is appropriate. In fact, she specifically mentioned her optimism three times; on inflation, on global headwinds fading, and on productivity growth.

                                    Monetary Policy isn’t a Panacea

                                    Citing payrolls, job openings, and the quit rate, she offered a positive view on labor while citing the recent jobs report, which showed a marked slowdown in hiring, as worrisome. Cautioning that one should not put too much weight on a single data point, she all but eliminated the possibility of a June hike, which the market had previously moved from a near impossibility to a coin flip in a matter of days. Finally, she also rightly pointed out that monetary policy is not a cure all; education and job training are key cogs around which the system functions. Understanding the limits of monetary policy is an important theme that the Multisector team has been discussing.

                                    While inflation is below target, she cited both oil and the dollar as temporary disinflationary factors likely to be unwound, in addition to growing wage pressure. This is nothing new. However, she did reiterate the risk to domestic demand on global “bumpiness” as it relates to both China and Brexit. This sounds a lot like the no-move in late 2015 to us, though the risk seems more tangible now.

                                    Gradual Change a Likely Constant

                                    In a nutshell, we didn’t learn much in the way of Fed thinking outside of a reaffirmation that rates will move gradually, and that the fed would prefer to keep rates on the low side. Put simply, the Fed is willing to tolerate a tighter labor market based on its desire to stoke inflation pressure, the knock-on effects of improving employment, and the fact that conventional policy tools are more adept at fighting inflation than deflation at or near the zero bound.

                                    Bottom Line: While the market’s presumption that zero rates were here to stay was unrealistic, presuming that the fed would spring a hike with a few days’ notice was also unlikely. The employment report was a catalyst for a slightly dovish shift in tone, but it is not yet the death knell for a Fed hike. The market should be comforted by Yellen’s remarks and the dollar’s rise may be capped for now. This supports risky assets at the margin.

                                    Henry Peabody, CFA

                                    Diversified Fixed Income Portfolio Manager

                                    Eaton Vance

                                    The employment report was a catalyst for a slightly dovish shift in tone, but it is not yet the death knell for a Fed hike.

                                    Latest advisory blog entry

                                    June 7, 2016 | 1:30 PM

                                    Argentina: What was old is new again

                                    Argentina was once one of the largest Latin American equity markets. However, in the late 2000s a restrictive regime of capital and currency controls was instituted. This move, following numerous other self-inflicted wounds, was the last straw for MSCI, which downgraded Argentina’s status from emerging to frontier in 2009, effectively removing it from most emerging-market portfolios. Still, those who continued to hold exposure to Argentina benefited, with index returns of 66.0%, 19.0% and -0.50% for calendar years 2013, 2014 and 2015, respectively.

                                    At the end of 2015, significant changes began occurring rapidly in Argentina. The longtime ruling party was unexpectedly voted out of office, and the new government moved swiftly to unwind its capital and currency controls, signaling a deep desire to reignite trade and allow foreign ownership of its stocks. Since then, investor reaction has been equally swift, with Argentina’s most recent bond issuance oversubscribed (with press reports that the $15bn issuance currently has investor demand to the tune of $70bn), and Argentine equity markets outpacing both emerging- and frontier-market indexes on a year-to-date basis.

                                    With all this positive news came the speculation that MSCI was to consider changing Argentina from frontier back to emerging-market status. However, this graduation will most likely not take place until 2018, by which time, arguably, any outsized returns from Argentina’s economic liberalization measures will have already happened.

                                    Given the observation that returns were not overly punishing for those who stuck with Argentina, it can be argued that a better choice for emerging-market investors may be to invest in a strategy that includes a relatively static allocation to a diversified set of frontier-market countries. Here’s why:

                                    • The motivation for investment in both markets is the same: seeking to capture the growth opportunities present in the less-developed economies of the world.
                                    • The size distinction between frontier and emerging is in many ways artificial with regard to this thesis, further reinforcing the argument to include an allocation to both classes in emerging-market portfolios.
                                    • The long process in moving a country from frontier to emerging allows much of the gains from this positive news to be realized prior to graduation, as was the case in 2014 for Qatar and UAE, and appears will be the case for Argentina.

                                    Bottom line: Although there is a delay in reverting Argentina back to emerging-market status, this does not mean that investors should shy away from frontier-market countries. A static allocation to a diversified set of these may prove beneficial, given that the motivation for investment in both markets is similar and the process of changing country from frontier to emerging allows time for gains from the positive news surrounding the market.




                                    Investments in foreign instruments or currencies can involve greater risk and volatility than U.S. investments because of adverse market, economic, political, regulatory, geopolitical or other conditions. In emerging countries, these risks may be more significant.

                                    Tim Atwill, CFA

                                    Head of Investment Strategy

                                    Parametric

                                    A better choice for emerging-market investors may be to invest in a strategy that includes a relatively static allocation to a diversified set of frontier-market countries.

                                    Latest advisory blog entry

                                    June 6, 2016 | 4:30 PM

                                    The largest fixed-income market you’ve probably never heard of

                                    Which investment-grade fixed-income sector has generated the highest total return over the past 10 years?

                                    The answer is taxable municipal bonds. Surprised? While they tend to be overshadowed by the more widely issued and better-known tax-exempt municipals, taxable munis are becoming an increasingly attractive opportunity for many institutional investors.

                                    Taxable munis share many of the same state and local government issuers of the traditional municipal market. Often, taxable debt is used to fund the same kinds of essential public-purpose projects, such as bridges, toll roads, water and sewer, airports, electric utilities, hospitals and schools. Unlike tax-exempt municipal bonds, the interest earned on taxable munis is federally taxable, but residents of the state where the bonds are issued will generally pay no state tax on earnings.

                                    Beyond performance, which can vary over time, taxable and tax-exempt munis are very much alike, with some differences:

                                    • Same issuers: The same state and local governments issue these bonds as general obligation bonds, backed by the issuer’s taxing authority, or revenue bonds, paid off with the earnings of a particular project.
                                    • Smaller market, but still significant: There is $470 billion in taxable muni debt outstanding versus more than $3.5 trillion in tax exempt, and 13,000 issuers compared with 60,000 issuers.
                                    • A more diverse buyer base: Taxable municipal bonds have a unique appeal to foreign investors. Because they don’t receive a tax exemption, they’re attracted to these bonds as a solid, low-risk, relatively high-yielding investment in U.S. infrastructure.

                                    Often overlooked by U.S. investors, taxable munis offer compelling value:

                                    • High quality, low default rate: Comparing taxable municipal bonds with corporate bonds, they have very low default rates, and a much higher representation of bonds rated AAA and AA.
                                    • Attractive current yields: In today’s global low-yield environment, the yield on municipal taxable bonds compares favorably with other investment-grade alternatives.
                                    • Low correlations: Taxable municipals have had low correlations with equity and high-yield bonds, helping to diversify a portfolio.
                                    • Research is rewarded: Diligent credit research is increasingly important in the muni market. Since the 2008 financial crisis, bond issuers no longer have an AAA rating, which means that municipal bonds trade on their underlying fundamentals, underscoring the importance of thorough research.

                                    Bottom line: We believe a flexible opportunistic approach allows access to all parts of the muni market: Taxable or Tax Exempt. Taxable municipal bonds can round out a diversified fixed-income portfolio, offering competitive yields, high quality and low risks of default. As a result, taxable U.S. municipal bonds are bringing the potential rewards of investing in U.S. infrastructure and other public-purpose projects to a growing number of U.S. and non-U.S. investors alike.

                                    Adam Weigold, CFA

                                    Senior Municipal Portfolio Manager

                                    Eaton Vance

                                    We believe a flexible opportunistic approach allows access to all parts of the muni market: Taxable or Tax Exempt.

                                    Latest advisory blog entry

                                    June 3, 2016 | 4:00 PM

                                    One month doth not a trend make...

                                    But, it sure can temporarily throw a wrench in the hawks on the FOMC's plans.

                                    The May employment report came in well below expectations, only adding 38k jobs in May (seasonally adjusted), well below expectations of 160k. While there were a few one-off issues affecting today's headline number, the weakness in today's report was fairly broad-based across the various sectors of the economy.

                                    Coming into today's report, the unemployment rate sat at 5%, the same as in August of last year, despite healthy job gains over the period, as the size of the workforce also increased. There was a dramatic decline in the unemployment rate in today's report, to 4.7%, the lowest it has been since 2007. Unfortunately, the decline was because of a drop in the participation rate and not because of a substantial increase in hiring.  

                                    Part of the weakness was caused by the striking Verizon workers, which subtracted roughly 35k from the headline number, meaning, all else equal, today's number was really more like 73k (still weak).

                                    Flooding in the south is likely to have depressed construction payrolls, as the sector mysteriously lost 15k jobs. The construction sector had been one of the strongest over the past few months, as all other signs show continued strength in both residential and commercial construction. I wouldn't put too much weight on this number, but certainly something to keep an eye on. Not seasonally adjusted, the construction sector gained 135k jobs, so perhaps part of the weakness is really in the seasonal adjustments.

                                    The one sector that continued to show very strong jobs gains was the health care sector, adding 55k jobs. The revisions to the prior two reports were also negative, subtracting 59k from the March and April data, bring the average gains over the period down from 184k to 155k.

                                    Perhaps the lone bright spot in the report, if there was one at all, was that the average hourly earnings continued to show wage inflation, increasing 0.2% month-over-month and 2.5% year-over-year.

                                    I've already read multiple economists tripping over each other to push back their rate-hike forecast, some now calling for December and others calling off 2016 rate hikes altogether. Unless someone has already received the next six months of economic data, it is far too soon to take rate hikes off the table for the rest of the year. While there won't be a hike in June, July is still very much on the table. The important thing to do over the coming weeks is to keep an eye on the data and corresponding Fed speeches to see if there really has been a downshift in the economy or if this was, in fact, a one-off blip. Monday will be our first sign of any change in tone from the Fed when Yellen speaks. After the hawkish shift from the Fed over the last few weeks, I suspect one weak headline payroll number will not be enough to completely shift the Fed's hawkish course. The Fed doesn't like the market completely pricing out rate hikes, so look for Yellen and other FOMC members to try to get the market back on sides once again.

                                    Bottom Line: The market's overreaction to today's numbers are eerily reminiscent to late last summer, when the market priced out the first rate hike until spring of 2016. While there is no denying today's payroll report was weak, it is also important to keep in mind that it is one data point. The Fed knows better than to completely reverse course over one weak data point and it also knows more recent data has shown the economy gaining steam and inflation picking up, which should lead it to be more suspicious over today's report.

                                    Andrew Szczurowski, CFA

                                    Portfolio Manager, Global Income Group

                                    Eaton Vance

                                    I suspect one weak headline payroll number will not be enough to completely shift the Fed's hawkish course.

                                    Latest advisory blog entry

                                    June 3, 2016 | 11:30 AM

                                    Do the opposite of other equity investors

                                    The list of uncertainties for equity investors continues to grow, from Washington policy indecisions to geopolitical risks. It is with little surprise to find more frequent bouts of widespread investor fear, resulting in increased market volatility. These findings were highlighted in our latest Advisor Top-of-Mind (ATOMIX) survey results.

                                    In fact, the trend toward greater fear and volatility has been apparent for around a decade now. Over the past 10 years, occurrences of market dips (5% or more) have reached levels last seen in the 1930s – the height of the Great Depression (see chart below).

                                    Elevated volatility levels have fashioned a new era of “investing.” The average holding period of stocks in the S&P 500 Index has steadily fallen from 21 months some 30 years ago to only around six months today! The problem with shorter investor time horizons is quite obvious: lower returns (see table below). When it comes to equity investing, time is definitely money. (Who knew that Benjamin Franklin’s quote would still resonate 200+ years later?)

                                    S&P 500 Rolling Returns

                                    6-month 6%
                                    12-month 12%
                                    36-month 42%
                                    60-month 79%
                                    120-month 220%

                                    Source: NDR

                                    Multitudes of geopolitical and economic challenges remain, but we believe these transitory headwinds will abate, presenting patient equity investors with longer-term opportunities. The two key words there are “patient” and “investor” (as opposed to being a “trader”).

                                    Bottom line: Patience and time remain key inputs to successful investment results, yet both have become an afterthought to many “investors.” Perhaps it’s time to do the opposite.




                                    Past performance is no guarantee of future results.

                                    Index returns do not reflect the effect of any applicable sales charges, commissions, expenses, taxes or leverage, as applicable. It is not possible to invest directly in an index.

                                    Yana S. Barton, CFA

                                    Portfolio Manager, Growth Team

                                    Eaton Vance

                                    Elevated volatility levels have fashioned a new era of “investing.”

                                    Latest advisory blog entry

                                    June 3, 2016 | 9:00 AM

                                    High-yield bonds offer opportunity amid uncertainty

                                    High-yield bonds occupy a special capital market niche. As obligations of companies with below-investment-grade credit ratings, they offer higher yields to compensate investors for accepting additional credit risk.

                                    High-yield bonds have offered better risk-adjusted returns than equities and lower interest-rate sensitivity than the broad fixed-income market(Source: Morningstar, Inc. for the 10 year period ended 3/31/16). Consider:

                                    • Better risk-adjusted returns than stocks: Over the past decade, high-yield bonds have produced essentially the same total return as stocks, with about two-thirds of the volatility, resulting in a higher Sharpe Ratio*. (Source: Morningstar, Inc. for the 10 year period ended 3/31/16)
                                    • Lower interest-rate sensitivity than bonds: The high income stream from high-yield bonds helps lower their duration** compared with broad investment-grade indices like the Barclays U.S. Aggregate Index and other fixed-income sectors. High-yield bonds have the highest yield per unit of duration of all fixed-income sectors (except floating-rate loans, which yield less).
                                    • Positive performance in rising rate markets: Rising rates are often an indicator of a strengthening economy. Because high-yield bonds are proxies for the credit strength of lower-rated companies, bond prices often move in tandem with equities. For example, over the 20 years ended March 31, 2016, during periods when 5-year U.S. Treasury yields gained 70 basis points (bps) or more in three months, high-yield bonds have averaged a gain of 2.5%, compared with a 3.0% return for the S&P 500 and a loss of 1.4% for investment-grade bonds, according to JPMorgan.

                                    • Improving fixed-income portfolio efficiency: The unique attributes of high-yield bonds have resulted in performance with negative correlation with other fixed-income asset classes. For example, the Barclays U.S. High-Yield Index has had a -0.27 correlation with U.S. Treasurys; only the lower-yielding floating-rate loan sector had lower correlation. Over the past five years, adding 10% or 20% high yield to a U.S. Agg portfolio would have increased efficiency with improved performance and reduced volatility.

                                    Bottom line: High-yield bonds have provided better risk-adjusted returns than equities, with less interest-rate sensitivity than the broad bond market. We believe these are two attractive qualities in today’s uncertain environment.




                                    *The Sharpe Ratio uses standard deviation and excess return to determine reward per unit of risk.

                                    **Duration is an approximate measure of a bond's price sensitivity to changes in interest rates.

                                    Unless otherwise stated, index returns do not reflect the effect of any applicable sales charges, commissions, expenses, taxes or leverage, as applicable. It is not possible to invest directly in an index. Historical performance of the index illustrates market trends and does not represent the past or future performance of the fund.

                                    An imbalance in supply and demand in the income market may result in valuation uncertainties and greater volatility, less liquidity, widening credit spreads and a lack of price transparency in the market. Investments in income securities may be affected by changes in the creditworthiness of the issuer and are subject to the risk of nonpayment of principal and interest. The value of income securities also may decline because of real or perceived concerns about the issuer's ability to make principal and interest payments. Investments rated below investment grade (typically referred to as "junk") are generally subject to greater price volatility and illiquidity than higher-rated investments. As interest rates rise, the value of certain income investments is likely to decline.

                                    Kelley Baccei

                                    High Yield Portfolio Manager

                                    Eaton Vance

                                    High-yield bonds have provided better risk-adjusted returns than equities, with less interest-rate sensitivity than the broad bond market.

                                    Latest advisory blog entry

                                    June 1, 2016 | 1:45 PM

                                    Is market volatility your “new normal”?

                                    Volatility in the global financial markets in 2015 has carried over into 2016, albeit in fits and starts. Slowing economic growth in emerging markets, U.S. recession worries and a decline in oil prices are some of the factors that have weighed on investor sentiment this year.

                                    According to our latest Advisor Top-of-Mind Index (ATOMIX) survey, many financial advisors and their clients appear to have resigned themselves to the fact that elevated volatility may be here to stay. While the spread between advisors’ top four concerns narrowed in our latest survey, managing market volatility remained their biggest challenge (for the third consecutive quarter).

                                    Here are some of our ATOMIX survey’s key findings:

                                    • Over half of advisors (53%) viewed volatility as the “new normal” and think that advisors and their clients should plan accordingly.
                                    • Over half (55%) of advisors said protecting wealth from market volatility increased in importance over the past 12 months.
                                    • In general, clients are much more worried about volatility than their advisors. In fact, eight in 10 advisors (81%) said their clients are motivated primarily by fear, as opposed to greed.
                                    • Of note, more advisors have been taking advantage of the persistent volatility and fear, which have sparked an increase in client conversations and planning opportunities.

                                    Advisor Top-of-Mind Index (ATOMIX)

                                    Tap into the perspectives of 1,000+ financial advisors.

                                    In general, clients are much more worried about volatility than their advisors.

                                    Latest advisory blog entry

                                    May 31, 2016 | 4:00 PM

                                    Deflecting interest-rate risk with floating-rate loans

                                    After several false starts, the U.S. Federal Reserve has indicated that a rate hike is imminent, so long as data demonstrate that forecasts for the economy’s improvement are accurate. With the increased likelihood that a rate hike is just around the corner, we believe that the case for floating-rate loans has never been stronger.

                                    The past three periods of rising rates since 1994 show why we believe floating-rate loans are likely to perform well compared with bonds in the current economic environment. When the federal funds rate increased by 300 basis points for the 12 months ended February 1995, loans returned 10.4% compared with 0.01% for bonds (see chart below). Most recently, when the Fed raised rates from 1.0% to 5.25% over the two years ended June 2006, loans returned 12.7% vs. 6.6% for bonds.

                                    Of course, there’s always the chance the Fed will delay raising rates. In a flat rate scenario, the yield advantage still goes to loans. As of April 30, the yield on the S&P/LSTA Leveraged Loan Index* was 6.1% versus 2.2% on the Barclays U.S. Aggregate Bond Index**. If rate increases take a while to materialize, you are getting paid to wait.

                                    After a couple of years of subpar performance for loans, there is evidence that investors are starting to recognize the potential advantage loans offer in today’s environment. With price improvement on the S&P/LSTA Index, plus yield, total return for the year through May 26 was 4.4% – almost as much as the 5% yearly return loans have had since the index inception in 1997.

                                    Bottom Line: With a Fed rate hike likely happening sooner rather than later, it’s helpful to remember that loans have handily outperformed bonds in rising rate periods. But, if the rate hikes come later rather than sooner, loans yield almost 4 points more than bonds.




                                    *The S&P/LSTA U.S. Leveraged Loan Index is designed to reflect the performance of the largest facilities in the leveraged loan market.

                                    **Barclays U.S. Aggregate Index is an unmanaged index of domestic investment-grade bonds, including corporate, government and mortgage-backed securities.

                                    Unless otherwise stated, index returns do not reflect the effect of any applicable sales charges, commissions, expenses, taxes or leverage, as applicable. It is not possible to invest directly in an index. Historical performance of the index illustrates market trends and does not represent the past or future performance of any investment strategy.

                                    An imbalance in supply and demand in the income market may result in valuation uncertainties and greater volatility, less liquidity, widening credit spreads and a lack of price transparency in the market. There can be no assurance that the liquidation of collateral securing an investment will satisfy the issuer's obligation in the event of nonpayment or that collateral can be readily liquidated. The ability to realize the benefits of any collateral may be delayed or limited. Purchases and sales of bank loans in the secondary market generally are subject to contractual restrictions and may be subject to extended settlement periods. Investments in income securities may be affected by changes in the creditworthiness of the issuer and are subject to the risk of nonpayment of principal and interest. The value of income securities also may decline because of real or perceived concerns about the issuer's ability to make principal and interest payments. Investments rated below investment grade (typically referred to as "junk") are generally subject to greater price volatility and illiquidity than higher-rated investments. As interest rates rise, the value of certain income investments is likely to decline. Bank loans are subject to prepayment risk.

                                    Scott Page, CFA

                                    Co-Director of Bank Loans

                                    Eaton Vance

                                    Craig Russ

                                    Co-Director of Bank Loans

                                    Eaton Vance

                                    We believe that the case for floating-rate loans has never been stronger.

                                    Latest advisory blog entry

                                    May 27, 2016 | 2:30 PM

                                    Do you need inflation protection?

                                    We believe inflation risks are underappreciated and underpriced. Now may be an opportune time for forward-thinking investors to add inflation risk management to their portfolios.

                                    It’s easy to understand the lack of investor demand for this asset class. The CITI Inflation Surprise Index has been negative 52 of the last 53 months. With the exception of the financial crisis, year-over-year (YOY) headline CPI has been lower than at any point since the late 1960s.

                                    What many investors don’t appreciate is how persistent weakness in energy and food prices has hidden the underlying growth in services inflation. While energy and food represent only 21% of the CPI, they explain about 80% of its change.

                                    • Spot WTI crude is down 55% from June 2014, while the S&P Goldman Sachs Food Index is down roughly 50% from its 2011 high.
                                    • Over this same period, the YOY run rate for services inflation has averaged 2.5% and has climbed above 3% over the past few months.

                                    We believe the bear market in food is over and that the energy bear market is either over or in its very late stages. Strength in energy and food should quickly translate to higher goods CPI, which, in turn, should help boost the already elevated services CPI. There is also evidence of increasing wage pressures. The 3.4% YOY growth in the Atlanta Fed Wage Growth Tracker in April is the strongest growth since February 2009. Historically, wage pressures have been associated with periods of higher inflation.

                                    The April CPI highlighted the changing inflation dynamic: The month-over-month change in headline CPI (0.4%) was the biggest monthly gain since February 2013. Also, at 2.1%, YOY Core CPI is now above the Fed’s 2% target; at 1.6%, YOY Core Personal Consumption Expenditures (PCE) (the Fed’s desired metric) is approaching its 2% target.

                                    The trend in year-over-year Core CPI bottomed in early 2015 and has since been moving higher. Several alternate CPI measures that attempt to remove the most volatile index components to better ascertain the underlying trend also confirm this.

                                    We think investors are beginning to realize that the bear markets in energy and food are near an end. After roughly a year of outflows, net flows into TIPS funds and ETFs have turned positive over the past two months (ended April 2016), while break-even inflation rates on 5-year TIPS have begun to price in higher expected inflation. (Sources: Eaton Vance and Bloomberg) We think these trends are still in their early innings.

                                    Bottom line: We believe inflation assets are inexpensive relative to growing inflation risks.

                                    Stewart Taylor

                                    Diversified Fixed Income Portfolio Manager

                                    Eaton Vance

                                    The trend in year-over-year Core CPI bottomed in early 2015 and has since been moving higher.

                                    Latest advisory blog entry

                                    May 26, 2016 | 12:00 PM

                                    Fallen angels: Be a buyer in a world of sellers

                                    Our multisector bond strategy looks to capitalize on structural or psychological inefficiencies in the market. One such inefficiency is the barrier between investment-grade and high-yield credit, which gives rise to the term “fallen angels.”

                                    Fallen angel bonds are those that ratings agencies downgrade to below investment grade. It could be due to issuer-specific or sector concerns; it could be cyclical or idiosyncratic. Either way, the fallen angel phenomenon has received a great deal of attention recently, perhaps because the number, size, duration and sector concentration of downgrades into high yield are notable. Our multisector team finds this cohort of bonds generally very attractive because it is represents a less supported segment of the market, which can often provide excellent return opportunities.

                                    Importantly, we note that holding credit through periods of stress (and not being a forced seller) has historically generated positive returns. In order to show this, we created an index of all the bonds in the Barclays High Yield Industrial Index that were downgraded to below-investment-grade status within the last year. We then show comparative total return from this time last year. Remember, this is pure index data which conservatively ignores security selection and dollar cost averaging. As can be seen, a painful for a period of time has historically yielded results for those willing to show patience.

                                    To be sure, every cycle is unique in its own way. But, there are certainly commonalities over time and they reside mainly in investor behavior. Forced selling of longer duration investment-grade paper by constrained accounts into an illiquid market that has deep macro concerns probably exacerbated this situation. In addition, loss aversion, short term focus, and plain old “nerves” are extremely strong forces.

                                    Bottom line: Keeping a cool head and an eye to the long term is one way to overcome near-term fright. A flexible mandate, a long-term and often times contrarian view, and deep credit work are needed to take advantage of opportunities as they arise. As shown with fallen angels over the past 12 months, those willing to opportunistically step into the breach may be rewarded.




                                    Past performance is no guarantee of future results.

                                    Index returns do not reflect the effect of any applicable sales charges, commissions, expenses, taxes or leverage, as applicable. It is not possible to invest directly in an index. Historical performance of the index illustrates market trends and does not represent the past or future performance of an investment strategy.

                                    Henry Peabody, CFA

                                    Diversified Fixed Income Portfolio Manager

                                    Eaton Vance

                                    Keeping a cool head and an eye to the long term is one way to overcome near-term fright.

                                    Latest advisory blog entry

                                    May 25, 2016 | 11:45 AM

                                    What are you paying for with muni bond ladders?

                                    In today’s municipal bond market, investors and their advisors understand the value of credit research. They also know it has been harder to find bonds in the marketplace. However, many are still resistant to the idea of paying to use a laddered structure for credit research and monitoring. We think it makes sense for investors to understand exactly what they’re paying for.

                                    What did many investors buy 10 years ago? Historically, they (and their advisors) bought insured municipal bonds, relying on bond insurers and ratings agencies. Prior to 2008, more than half of all muni issuance was insured and the largest insurers were rated AAA. Investors elected to take less in yield in exchange for the perceived security of an AAA rating.

                                    An example here may be helpful. In March 2004, New York City issued a general obligation deal, including both insured and uninsured bonds both due in 2015. The uninsured bonds (CUSIP 64966LAQ4) were rated A2 by Moody’s at issuance. These bonds had a 3.75% coupon and came at a dollar price of $98.903 to yield 3.87%.

                                    The insured bonds (CUSIP 64966LAR2) were rated Aaa by Moody’s at issuance, which was based on XL Capital Assurance’s (XLCA) rating at the time. The insured bonds had a 3.50% coupon and came at a dollar price of $99.903 to yield 3.51%. Buyers of the insured bonds gave up 36 basis points in yield annually, in effect paying for the AAA insurer guarantee.

                                    Unlike a manager, clients cannot fire their bond insurer. With the downgrades of the monoline insurers, paying a premium for insured bonds proved to be a bad option. With the NYC GO bonds, it turned out to be a poor deal, as XLCA was downgraded to junk in 2008 before having its rating withdrawn in 2012. (Investors were spared disaster, however, as the improving NYC’s GO credit was upgraded to Aa2 in 2012).

                                    The spread differential between insured and single A-rated bonds was seen across the broader market. We compared the BofA/Merrill Lynch Single-A Municipal Securities Index with the BofA/Merrill Lynch US Insured Bond Municipal Securities Index for the 10-year period prior to January 1, 2009. Over the decade, the insured index averaged 33 basis points less in yield than the single-A index with an average duration difference of 0.25 years. This is essentially the “fee” that insured bond buyers paid.

                                    Bottom line: In the post-bond insurance world, we think that paying for credit research and monitoring is worth consideration. That is before even weighing the other potential advantages, including broad market access, rules-based portfolio structuring and institutional pricing.

                                    Evan Rourke, CFA

                                    Municipal Portfolio Manager

                                    Eaton Vance

                                    We think that paying for credit research and monitoring is worth consideration.

                                    Latest advisory blog entry

                                    May 24, 2016 | 10:00 AM

                                    A bipartisan solution for Puerto Rico?

                                    To date, the U.S. government has not provided a solution to Puerto Rico’s escalating fiscal crisis. That may change now, thanks to the introduction of the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA), which promises to bring “lawful order to chaos in Puerto Rico and mitigate a looming humanitarian crisis.”

                                    The goal of PROMESA is to institute economic and fiscal reforms in order to deliver solvency, future growth and access to capital markets. The Act would establish a federal oversight board, comprised of seven members appointed by the president. This board would be tasked with enforcing balanced budgets and government reform, should Puerto Rico’s leadership fail to do so. This would include:

                                    • Ensuring funding of public services
                                    • Providing adequate funding for public pensions
                                    • Eliminating structural deficits that have plagued the island for a decade
                                    • Maintaining a sustainable debt burden

                                    The oversight board will also control the debt restructuring process in order to “ensure fairness to creditors and debts in any debt adjustment.” This will allow certain entities access to something similar to Chapter 9 bankruptcy protection, although it is not the same for a variety of reasons. Notably, under PROMESA, the debtor does not have to be insolvent to restructure their debt, and any restructuring must “respect the relative lawful priorities or lawful liens, as may be applicable, in the constitution, other laws or agreements of a covered territory.”

                                    We note that an original bill by the House Committee on Natural Resources failed to gain bipartisan support in late March. So while not a perfect solution, PROMESA is a positive step to help Puerto Rico address its debt crisis now. The next key deadline for Puerto Rico is July 1, when $1.9 billion in debt service payments from 14 different Puerto Rico issuers – including $780 million in general obligation (GO) payments – comes due.

                                    Bottom line: PROMESA appears to be a step in the right direction for the struggling territory. While the bill does appear to strip the island of some of its sovereign power, with bipartisan support, we think PROMESA (or something close to it) will gain congressional approval.

                                    William Delahunty, CFA

                                    Director of Municipal Research

                                    Eaton Vance

                                    The goal of PROMESA is to institute economic and fiscal reforms in order to deliver solvency, future growth and access to capital markets.

                                    Latest advisory blog entry

                                    May 23, 2016 | 9:30 AM

                                    Why a diversity of income streams makes sense now

                                    With headlines that call attention to the $9 trillion in global debt trading at negative yields, investors are right to be worried about finding sources of income without taking on too much risk. Given these concerns, we think investors should consider a diversity of income streams by utilizing a global, multi-asset class approach to income investing.

                                    Indeed, finding engines of income around the world is a challenging endeavor, as the chart below shows. Central bank action, most notably in Japan and Europe, has resulted in negative interest rates to spur inflation and investment. But, as a result, absolute yields are near record lows and investors in search of income are forced to take on more risk.

                                    We think this is where a global, multi-asset class approach can help. By looking at an array of income-producing securities and taking a flexible approach, investors may be able to navigate the challenges that face the traditional sources of income. A diversification of income sources may help satisfy investor needs. And a global approach broadens the potential universe from which to seek attractive investments.

                                    For example, many dividend portfolios are heavily weighted with traditional income-paying sectors, such as real estate investment trusts (REITs), telecom, utilities and consumer staples. We think that investors should consider a greater diversity of income streams that includes other equity sectors (financials, health care, industrials and information technology, for example), while also augmenting the strategy with domestic and international high-yield corporate bonds and preferred stock.

                                    Bottom line: At the end of the day, it’s about generating income. We think the best way to accomplish this is through a diversified approach that looks globally for opportunities. By using many engines to generate income, we think investors may be able to overcome the challenges posed by today’s low- and negative-rate environment.




                                    Diversification cannot ensure a profit or eliminate the risk of loss.

                                    Michael Allison, CFA

                                    Equity Portfolio Manager

                                    Eaton Vance

                                    A diversification of income sources may help satisfy investor needs.

                                    Latest advisory blog entry

                                    May 20, 2016 | 9:45 AM

                                    Sell in May or buy the dips?

                                    The old adage tells investors to “sell in May and go away.” That motto is true this year, as risk markets have been challenged month-to-date. However, I believe we could see a return to the trend higher, although the market first needs to digest two significant worries over the next few months.

                                    Let’s address what we do know. The market is no longer worried about a global recession. But, we also know markets do not go up in a straight line. There are some headwinds that investors are concerned about, particularly China’s debt burden and the upcoming U.S. election.

                                    Taking China’s debt burden first, policymakers in China do not want to use monetary stimulus via interest rates to target growth. Lower rates will encourage capital flight and could destabilize global markets. More than anything, the Chinese want a stable currency right now as does the rest of the world.

                                    If you look at the debt situation in China, there are many small- to medium-sized companies that have issued debt in the last several years and are now unable to repay. Markets are worried about imminent defaults, and yet China would be demonstrating its willingness to let companies fail. To me, this sounds like China wants to get market economy status no matter how the markets react. It doesn’t mean a hard landing for China; it means they’re addressing some of the painful issues.

                                    Closer to home, people want change during this U.S. election cycle and they're asking for the politicians to show them growth and better incomes. No matter who wins the White House, Washington will be given a mandate to spend. Historically, public sector investment leads private sector investment, and eventually this flows to higher GDP and higher interest rates. It also means the U.S. dollar may continue to weaken.

                                    So yes, the market will have to digest these headwinds. But, consider the scenario of better U.S. growth and a stable global economy. This could lead to a resumed uptrend for risk markets, driven by a weaker U.S. dollar as fiscal spending picks up and encourages healthier risk appetites.

                                    Bottom line: We argue that it takes a long-term view to set aside near-term worries. The market is certainly going through a choppier period, and we expect the market to struggle in the months ahead. The headwinds may dissolve, so we think this is when investors should consider “buying the dips.”

                                    Kathleen Gaffney, CFA

                                    Co-Director of Diversified Fixed Income

                                    Eaton Vance

                                    The market first needs to digest two significant worries over the next few months.

                                    Latest advisory blog entry

                                    May 19, 2016 | 9:30 AM

                                    Global health care stocks may have a silver lining

                                    Select stocks in the traditionally defensive health care sector currently offer some of the best risk-return prospects in today’s tough investment climate, in our view. This sector has been under a cloud in recent months on concerns about political pressures, but there is a silver lining to all this. Valuations now discount – more than adequately – these risks and fundamentals have actually improved.

                                    Going against consensus opinion, we have been upping our health care exposure in our global strategies. Events in the US do affect the sector globally – the US accounts for around 40% of global health care spend. However, fears that the next US president or Congress might push through stringent legislation to rein in escalating drug prices are, we believe, overdone. In reality, drug price increases to date have mostly been reasonable. Market pricing mechanisms are working and price figures quoted in news headlines – the gross increases - are somewhat misleading because actual price increases to the patient are considerably lower. Further, although both Democrats and Republicans are focused on health care, implementing a new price-limiting regime will not be easy.

                                    True, the sector continues to face uncertainty. However, in a low-growth world where concerns about corporate profit margins persist and many S&P500 stocks look fully valued, we believe select stocks in the global health care sector have a lot going for them. In our assessment:

                                    • FDA approvals of new drugs are at an all-time high
                                    • Drug and biotechnology pipelines are robust
                                    • Free cash flow among pharmaceutical companies remains high
                                    • Healthcare companies have become more disciplined in terms of capital allocation
                                    • The M&A premium in the sector has now disappeared
                                    • Pharmaceutical stocks trade at a meaningful discount to consumer staples

                                    Bottom line: Health care is an unloved sector that, in our view, offers an attractive entry point for investors seeking to dampen equity portfolio volatility and generate reasonably attractive risk-adjusted returns over the next three to five years.




                                    This material should not be considered as a recommendation of any particular security, strategy or investment product. Eaton Vance recommends that investors independently evaluate particular investments and strategies, and encourages them to seek a financial adviser's advice.

                                    Samantha Pandolfi

                                    Portfolio Manager

                                    Eaton Vance

                                    Valuations now discount – more than adequately – these risks and fundamentals have actually improved.

                                    Latest advisory blog entry

                                    May 18, 2016 | 5:00 PM

                                    The Fed hawk attack is back

                                    The minutes from the April Federal Open Market Committee (FOMC) meeting were a noticeable change from the dovish Fed commentary of March and April. While the FOMC and Chair Janet Yellen had taken a more dovish tone over the past few months, there has been a concerted effort by the FOMC over the past week or two to get markets to price in a higher probability of rate hikes than markets were previously.

                                    This hawkish communication from FOMC members was certainly accentuated by the minutes released today highlighting that, “Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen and inflation making progress to the Committee’s 2% objective, then it likely would be appropriate for the Committee to increase the target range for the federal funds rate in June.”

                                    While a rate hike in June isn’t a forgone conclusion – market odds are now close to 32% versus around 4% on Monday – it is certainly possible and probably more likely than many investors think. However, we think it is likely that by the July FOMC meeting the Fed will raise rates because the Brexit vote would be over (assuming the “remain” vote wins), and also it would give the Fed the June meeting to set the market up for a July hike.

                                    Bottom line: Clearly, the FOMC minutes are setting up for a possible hike in June. However, I don’t think the Fed wants to tighten financial conditions too much and, so, I think the Fed will play this cat-and-mouse game with the markets where it oscillates from being dovish to hawkish and back again.

                                    In a few years it could look back (if all went according to plan) and say that it was able to normalize policy rates at a slow pace with some stop-and-start action so that, ultimately, rates would be closer to normal without tightening financial conditions too much.

                                    Eric Stein, CFA

                                    Co-Director of Global Income

                                    Eaton Vance

                                    Clearly, the FOMC minutes are setting up for a possible hike in June.

                                    Latest advisory blog entry

                                    May 18, 2016 | 1:15 PM

                                    Will tobacco bonds go up in smoke?

                                    Tobacco bonds are in focus this week after Fitch Ratings announced plans Monday to withdraw its ratings on all tobacco bonds due to unpredictability of future payments. These bonds have been very popular with investors over the past year, thanks to attractive yields, federally tax-exempt income and double-digit returns. But, are investors being adequately compensated by taking on this credit risk?

                                    Despite their recent popularity, tobacco bonds are largely misunderstood by some investors. Unlike traditional municipal securities, these bonds are issued by states and are backed by proceeds from the Tobacco Master Settlement Agreement (MSA), which in 1998 settled lawsuits for medical costs associated with tobacco use. Payments made by the three largest U.S. tobacco companies to the states are based largely on shipments of domestic cigarettes.

                                    Many states securitized this annual payment stream, so tobacco bonds’ performance is tied principally to sales of cigarettes. The issuers – with the exception of certain deals in a small number of states – are not required to step in if the MSA payments fall short. In other words, the credit profile of a tobacco bond is not tied to the creditworthiness of the issuing state. As a result, 80% of this segment of the muni bond market is rated below investment grade (Source: BofA/Merrill Lynch).

                                    Two recent settlements (involving New York and California, among others) introduced new, custom modifications to the calculations that have been consistently used to make annual payments to states. As a result, Fitch Ratings says it does not have confidence ratings can be consistently maintained. The ratings agency will withdraw its ratings on all tobacco bonds in 30 days.

                                    Despite the rally in tobacco bonds, we have been consistent in our position that many uncontrollable long-term negative credit drivers exist for the sector. For example, on June 9, California will raise the smoking age to 21 from 18, the second state after Hawaii to pass this legislation. While returns and attractive yields have spurred demand for tobacco bonds, demand declines for actual tobacco products are set to be the largest driver of credit performance for these bonds going forward.

                                    It remains extremely difficult to predict the nature, timing and severity of the credit and sector shocks and the corresponding effects on pricing. We have already seen that the tobacco sector can be volatile; during the municipal bond market sell-off in 2013, tobacco bonds had the second-worst return of all the sectors in the Barclays High Yield Municipal Bond Index, eclipsed only by Puerto Rico bonds.

                                    Bottom line: If cigarette shipments decline as we expect them to, the risk of default on tobacco bonds increases. Due to the potential for widespread defaults in the tobacco sector, we believe more attractive options currently exist in the municipal bond market for investors in need of federally tax-exempt income.

                                    Cynthia Clemson

                                    Co-Director of Municipal Investments

                                    Eaton Vance

                                    Despite their recent popularity, tobacco bonds are largely misunderstood by some investors.

                                    Latest advisory blog entry

                                    May 17, 2016 | 10:45 AM

                                    Is the US consumer slowing?

                                    On Wednesday, Macy’s kicked off the first-quarter earnings season for department stores with a sizeable topline miss, reporting a 7.4% drop in sales. On Thursday, Kohl’s and Nordstrom also reported disappointing results, with same-store sales declines for all three at levels not seen since 2009. The market reacted aggressively to these earnings misses, with all three stocks down 15% to 20% last week.

                                    With other large apparel retailers such as Gap and L Brands also reporting soft trends, investor sentiment on consumer-related equities has been shaken. The S&P Retail ETF (XRT) fell 4.4% on Wednesday, underperforming the S&P 500 by 3.5%. For perspective, this was the worst day of relative performance for this ETF since November 2008 and a five-standard deviation relative move.

                                    While it is prudent to ask the question of whether or not the U.S. consumer is slowing (and therefore, putting the overall economy at risk), we see this as a micro issue, largely confined within the apparel retailers. Price transparency, an accelerating shift online and changing spending preferences are structural headwinds challenging these companies. Yet, with the unemployment rate low, wage growth gradually improving and consumer confidence levels near cycle highs, we do not believe this week’s dismal results are indicative of a broader consumer slowdown.

                                    Two weeks ago, Amazon’s North American retail business beat revenue expectations by over $1 billion, with growth rates accelerating to over 30%. Amazon is increasing its focus on apparel and it is likely that it will surpass Macy’s as the largest apparel retailer in the coming years. This week, we will get earnings results from key nonapparel retailers, which we expect will paint a healthier picture of the U.S. consumer.

                                    Bottom Line: While time will tell, we believe that the U.S. consumer is on solid footing. To be sure, the retail landscape is rapidly evolving. While there are structural headwinds for traditional mall-based retailers and department stores, investment opportunities exist for strong brands and advantaged business models that can capitalize on this shift.




                                    This post should not be considered as a recommendation of any particular security, strategy or investment product.

                                    Edward J. Perkin, CFA

                                    Chief Equity Investment Officer

                                    Eaton Vance

                                    Investment opportunities exist for strong brands and advantaged business models that can capitalize on this shift.

                                    Latest advisory blog entry

                                    May 13, 2016 | 3:30 PM

                                    Why REITs may see more attention soon

                                    Real estate investment trusts (REITs) are about to become much more prominent in the world of public equities. Historically, REITs have been buried within the Financials sector. Early this year, financials accounted for about 16% of the S&P 500 Index, with REITs and other real estate companies comprising about 20% of that financials sleeve.

                                    This summer, real estate will be broken out into its own GICS sector, the first new sector since the GICs classification system was introduced 1999. Its weighting in the S&P 500 – likely just over 3% – will be in the same ballpark as utilities, telecom and materials (currently the three smallest sectors in the Index).

                                    Why is this important?

                                    • Most diversified fund managers are underweight REITs. The range of generalist investor underweight has been estimated as high as $95 billion by JPMorgan and Raymond James, to a more moderate level of $30 billion by BofA/Merrill Lynch. While the amounts may vary, it seems likely the group will gain heightened attention and greater inflows from diversified fund managers under the new classification.
                                    • This is a growing sector. If we look at the growth in the space over the past few decades, it is clear to us that investors and property owners approve of the REIT structure for allowing public market investors to own income-producing real estate assets.

                                    In addition to the importance of having its own GICS classification, we see several advantages REITS can provide to investors:

                                    • Dividends or current income. REITs are required to pay out at least 90% of taxable income. As such, the yield on REITs has historically been considerably higher than other equities.
                                    • Diversification. REITs are a distinct asset class, different from bonds and equities. REITs help investors get direct exposure to traditionally illiquid real-estate markets (commercial, residential, industrial) and on a wide geographic basis. They also tend to offer a low correlation to the broader market.
                                    • Inflation hedge. In a rising price environment, rents and property prices have historically climbed. This type of inflation hedge may protect investors. In fact, REIT dividend hikes have increased more than the CPI in all but two of the past 20 years.

                                    Bottom line: The upcoming GICS change is shining a spotlight on the advantages of REITs, which will likely cause further inflows. While this is an added benefit, we believe it makes good investment sense to maintain REIT exposure at all times.




                                    Real estate investments are subject to special risks including changes in real estate values, property taxes, interest rates, cash flow of underlying real estate assets, occupancy rates, government regulations affecting zoning, land use, and rents, and the management skill and creditworthiness of the issuer. Companies in the real estate industry may also be subject to liabilities under environmental and hazardous waste laws, among others. REITS are subject to the special risks associated with investing in the real estate industry. Changes in underlying real estate values may have an exaggerated effect to the extent that REITs concentrate investments in particular geographic regions or property types.

                                    Scott Craig

                                    REIT Portfolio Manager

                                    Eaton Vance

                                    We believe it makes good investment sense to maintain REIT exposure at all times.

                                    Latest advisory blog entry

                                    May 12, 2016 | 11:00 AM

                                    The technical outlook for loans

                                    The loan market’s price rally continued in April, with the S&P/LSTA Leveraged Loan Index returning 1.99% during the month. This follows a return of 2.76% for the loan market in March, as the asset class’ technical conditions remained strong.

                                    What is the outlook for the loan market’s technical conditions after back-to-back monthly gains? Certainly, we have seen favorable trends experienced on both the supply and demand sides of the equation in March and April. Looking ahead, we see supply and demand fitting together well, but it's quite fragile. We do believe the market’s technical balance remains delicately tipped toward one of strength, and thus the direction and magnitude of investor flows will be an important influence in the short run.

                                    On the demand side, the loan market may be on the verge of seeing inflows. Based on current yields, the asset class looks attractive relative to other income-generating investments, in our view. There is a general misconception that the floating-rate loan market only performs well in an environment where the Federal Reserve is hiking rates. However, we saw slightly positive inflows in March and April, so we believe prospects for inflows are bright.

                                    Looking at issuance, the pipeline over the next month or two is light at around $20 billion. This soft patch in supply is supportive of the technical backdrop, but will not likely be sustained. Spreads narrowed significantly in March and April, which makes issuance easier. Conditions are ripe for M&A activity, too, so we could see a pickup in issuance over the next few months.

                                    Bottom line: After two months of strong returns, the loan market appears unlikely to keep pace with the pace of returns witnessed in March and April. We believe pricing indicates modest upside potential at current levels. That said, investors may continue to be drawn to the attractive yield of this floating-rate asset class. If we do see retail inflows without an addition to supply, loan prices could grind higher.

                                    Craig Russ

                                    Co-Director of Bank Loans

                                    Eaton Vance

                                    We do believe the market’s technical balance remains delicately tipped toward one of strength.

                                    Latest advisory blog entry

                                    May 11, 2016 | 2:45 PM

                                    What to avoid and utilize in times of volatility

                                    Many people think we’re currently in a high-volatility environment, but the reality is that volatility today is not materially above the long-term average. We come from a relatively low-volatility environment, historically. If we use the CBOE Volatility Index (VIX) as a reference, volatility since the end of 2015 averaged a little more than 21.5. Long-term VIX averages in the high 19s.

                                    What caused the bump? There are many contributors to volatility, and there’s no shortage of uncertainty in today’s markets. Many investors approach volatility with fear – they understand that rising volatility generally means more stressful market environments. That being said, there are a number of strategies investors should consider utilizing to combat (and avoid) this uncertainty.

                                    Strategies to avoid during volatile periods:

                                    • Low-volatility strategies: Investors need to be conscious of what they’re getting into. These strategies don’t outperform in every situation, namely a down market.
                                    • Holding cash: Investors holding cash during volatile periods, we believe, is challenging in the long term. They are holding risk assets to fund future liabilities, which are growing faster than cash, and they often struggle to gauge when the market is bottoming and jump back in.
                                    • Derivatives: Derivatives have often been used to manage portfolio volatility, however, we generally don’t advocate this approach. Most investors ultimately become fatigued with the expense and tend to terminate programs, often right before a market experiences challenges.

                                    Strategies to utilize during volatile periods:

                                    • Address unintended risks: Recently investors have become interested in hedging currency exposure – after the strong rally in the dollar. When it comes to risk, we advocate that investors get ahead of the curve.
                                    • Disciplined, mean-reversion rebalancing: Markets tend to move in cycles, and rebalancing plays to that theme by selling after strength and buying on weakness.
                                    • Sell volatility in a transparent, liquid and fully-collateralized manner: One preferred way is through index options and trying to capture what academic and market research has identified as the volatility risk premium.

                                    Bottom line: When faced with volatility, investors need to take a step back and focus on the long term, and not become reactionary by trying to shuffle their portfolio to follow the latest fad.




                                    Derivative instruments can be used to take both long and short positions, be highly volatile, result in economic leverage (which can magnify losses), and involve risks in addition to the risks of the underlying instrument on which the derivative is based, such as counterparty, correlation and liquidity risk.

                                    Thomas Lee, CFA

                                    Managing Director, Investment Strategy and Research

                                    Parametric Portfolio Associates LLC

                                    That being said, there are a number of strategies investors should consider utilizing to combat (and avoid) this uncertainty.

                                    Latest advisory blog entry

                                    May 10, 2016 | 10:00 AM

                                    What to make of first-quarter earnings results

                                    Earnings reactions have been muted for U.S. equities as first-quarter results have been released. The benefit of correctly forecasting quarterly earnings results has been subdued in recent years, as many company management teams talk down numbers to a low hurdle that can be cleared. The market cares more about the future than the past, so stock prices tend to only react positively when the forward outlook improves.

                                    So far, more than 60% of companies in the S&P 500 have reported first-quarter earnings. The one-day relative reaction to EPS (earnings per share) beats has been +1.3% and just -1.0% for EPS misses. This gap has been narrowing in recent quarters. Notably, the exception to the theme of muted EPS reactions is in the technology sector, where there have been absolute moves of 5% or higher on results day for some of the most recognizable names.

                                    Looking ahead, I continue to favor inexpensive defensives and quality cyclicals. Over the past 18 months, the S&P 500 has bounced between 2000 and 2150, with the occasional short-lived correction when worries about China, global growth and credit spreads surface. With the S&P 500 back to 2060, most stocks are back to looking fully valued.

                                    The challenge in this environment is that most defensive stocks (such as consumer staples and utilities) appear to be expensive, while the cyclicals (energy, materials and consumer discretionary) carry more economic risk.

                                    Bottom line: I think the best opportunities in U.S. equities are in inexpensive defensives and quality cyclicals. This includes the industrials sector, which is where we are finding opportunities in quality cyclicals. We also note that the traditionally defensive health care sector has lagged in recent months due to political pressures, and now looks inexpensive.

                                    Edward J. Perkin, CFA

                                    Chief Equity Investment Officer

                                    Eaton Vance

                                    I think the best opportunities in U.S. equities are in inexpensive defensives and quality cyclicals.

                                    Latest advisory blog entry

                                    May 9, 2016 | 2:45 PM

                                    Why Friday’s jobs report wasn’t so negative

                                    The U.S. economy added 160,000 jobs in April, below expectations of 200,000. However, the report is not as negative as some market pundits and economists are making it seem.

                                    It is important to keep in mind that one month doth not a trend make, and there are seasonal adjustments and distortions from weather, which can wreak havoc on a single month. For example, when last September’s payroll report showed the U.S. economy added 149,000 jobs, many doomsayers said the labor market was weakening and job gains going forward would be muted. What followed was the strongest quarter of the year, with the U.S. labor market averaging over 280,000 job gains.

                                    Now, I am not expecting a repeat of 280,000 job gains over the next few months. However, it is important not to jump to conclusions over one number, which has a 90% confidence interval of +/- 115,000 (a range between 45,000 and 275,000 for Friday’s number).

                                    The details of the report were a mixed bag:

                                    • Average hourly earnings rose 0.3% month over month and are now up 2.5% year over year. Wage inflation should continue to creep higher over the coming months; this has been the unicorn the Fed has been looking for.
                                    • The unemployment rate held at 5%, with the U-6 rate ticking down to 9.7%. Unfortunately the decline in the U-6 rate was because the participation rate declined to 62.8% from 63%.
                                    • After averaging 15,000 job additions per month the last four months, the government sector saw payrolls decline 11k, the bulk of which came from the U.S. Postal Service.
                                    • The manufacturing sector added 4,000 jobs in April after 45,000 in losses in the previous two months. It is possible dollar weakness might be breathing new life into the sector, but it is too soon to tell.
                                    • The health care sector continues to be the primary driver of job gains, adding 44,000 jobs in April.

                                    Overall, the April payroll report will not change the Fed’s outlook on the U.S. labor market. A June rate hike might be off the table, but it is not because of Friday’s employment report. It is likely because the Fed is concerned about the U.K. vote to leave the European Union a week after the Fed’s June meeting. The market wrote off a June rate hike long ago and is currently only pricing in a 6% chance of a hike. In fact, a hike isn’t fully priced in until 2017.

                                    Bottom line: Even if the Fed doesn’t expect to hike in June, it doesn’t like the market assigning such a low probability for June and the rest of the year. Expect the Fed to try and realign the market through upcoming speeches.

                                    Andrew Szczurowski, CFA

                                    Portfolio Manager, Global Income Group

                                    Eaton Vance

                                    The April payroll report will not change the Fed’s outlook on the U.S. labor market.

                                    Latest advisory blog entry

                                    May 9, 2016 | 10:00 AM

                                    Four arguments for emerging markets now

                                    A growing percentage of the world’s population, and a correspondingly growing percentage of economic activity, is taking place in the developing world. Below are four arguments which we believe justify why an investor should want to stay invested in the emerging markets (EM), and, if not currently invested, why an investor may consider now to be an opportunity to add exposure.

                                    • Valuations: EM stocks are much cheaper than developed-market stocks, as demonstrated by the much higher cyclically adjusted P/E ratios (CAPE) ratios observed in developed markets. When compared to their historical averages, we also see that U.S. equities are at extended valuations, while both developed markets and EM are currently standing below their average measurement.
                                      Judged by CAPE, emerging market stocks are much cheaper than developed market stocks.

                                        Year-end CAPE 10-Year Historical Average CAPE Comment
                                      Emerging Markets 10.1x 17.7x Current valuations are far below historical average
                                      Developed Markets 15.5x 19.9x Current valuations are moderately below historical average
                                      U.S. 22.1x 19.4x Current valuations are moderately above historical average


                                      Sources: Developed is represented by MSCI World Index; Emerging by MSCI Emerging Markets Index; U.S. by S&P 500 Index. All data are as of 12/31/2015.
                                    • Dollar strength: Equity markets in a foreign country’s base currency may have increased, but when translated into U.S. dollar terms, the depreciation of the foreign currency versus the dollar results in a loss. We would emphasize that recent experience is not a good representative of forward expectations of currency impacts on EM returns.
                                    • Diversification: The stock markets of emerging and frontier countries are driven more by their individual dynamics than events in the global markets. Portfolios which include an allocation to emerging markets have the potential to produce higher expected returns with lower expected volatility than portfolios which do not contain such an allocation.
                                    • Unconscious (and unconscionable) underweight: The MSCI ACWI Index’s allocation to EM is currently 9.6%, so by not holding EM equities, an investor is essentially saying he hates the asset class so much, he would like to hold a nearly 10% underweight to a neutral position. We rarely find a level of conviction which matches the magnitude of this bet.

                                    Bottom line: Recent performance in the EM asset class has caused such a degree of fear, that for many investors the strategic reasons for owning the asset class no longer seem quite so compelling. Perhaps the most germane advice, however, is to repeat Warren Buffet’s homily that investors should, “Be fearful when others are greedy. Be greedy when others are fearful.”




                                    Investments in foreign instruments or currencies can involve greater risk and volatility than U.S. investments because of adverse market, economic, political, regulatory, geopolitical or other conditions. In emerging countries, these risks may be more significant.

                                    Tim Atwill, CFA

                                    Head of Investment Strategy

                                    Parametric

                                    The stock markets of emerging and frontier countries are driven more by their individual dynamics than events in the global markets.

                                    Latest advisory blog entry

                                    May 6, 2016 | 3:00 PM

                                    How higher wages can impact the economy

                                    SECOND IN A SERIES

                                    Yesterday, we examined how large national statistics are showing upward pressure on wages. This morning’s 2.5% year -over -year increase in average hourly earnings, up 0.3% month over month, supports this idea. Just as important are anecdotes on upward minimum wage pressure that impact the low- and lowest-income segments of the population.

                                    This is important for several reasons, beyond the obvious social discussion, including the notion that lower-income earners tend to spend more of their income. In addition, this is the segment of the population that has been less positively impacted by rising asset prices since the credit crisis.

                                    There has also been greater focus on hiring full-time labor as opposed to part-time labor, particularly in retail and service industries. Our retail analyst points to a focus on the total cost of labor, not just hourly wage. Brand reputation, customer experience and employee turnover all have implicit costs that are not accounted for when superficially focusing only on per-hour costs. Importantly, the associated stability of full-time employment, along with health care benefits, can unlock consumer spending and household formation. This is a significant development that should be monitored.

                                    We expect this trend to continue, which will be a positive for the overall economy and the welfare of millions of laborers. As can be seen below, we deflated the national minimum wage by both CPI and a 3:1 ratio of home and food price inflation; recent CPI reports show roughly 3:1 ratio of weight of importance in the index. While the national minimum wage has risen over 100% in the last 25 years, it is roughly 10% lower on a CPI-deflated basis. The two solutions to this would be a significantly deflationary period, allowing real wages to move higher, or higher wages orchestrated by private and public bodies. We believe the latter is more likely, and it would have a more positive impact on spending, the economy, interest rates and credit quality.

                                    Upward wage pressure has begun in earnest. It has been based not only on the tightness of the labor market, but also and in a related fashion, by a notable upward move in the low-income portion of the workforce. These are positive data points that imply better consumption and growth.

                                    Bottom line: The Fed is watching this pressure closely, and along with the implicit pressure on the fed funds rate, fiscal policy that supports growth and a better aligns savings and investment should support higher rates over time. This, along with the lack of value and duration risk in U.S. Treasurys, helps guide our decision to avoid rate risk.

                                    Henry Peabody, CFA

                                    Diversified Fixed Income Portfolio Manager

                                    Eaton Vance

                                    These are positive data points that imply better consumption and growth.

                                    Latest advisory blog entry

                                    May 5, 2016 | 3:45 PM

                                    Finally, wage pressures are building

                                    FIRST IN A SERIES

                                    One of the investment themes that our multisector bond team has been discussing is an eventual rise in interest rates, which will likely be driven by increased inflation pressure and the potential for fiscal policy expansion globally. This helps to inform our view on government bonds, as well as play a role in focusing bottom-up work on commodity credit and currency.

                                    The market is debating the end of a monetary policy era, and naturally pivoting toward deflationary concerns. We believe that this short- term focus provides opportunity for contrary thinking. While this is certainly a concern regionally, particularly in Europe and Japan, which has the effect of pulling global interest rates lower, let us focus for a moment on the U.S. and the long-term power of fiscal expansion and wage growth.

                                    Those who view the U.S. economy in a more favorable light and see risks to price pressure often look to wage growth as a sign of that pressure, as well as implicit growth embedded in a tight labor market. Indeed, the level of jobless claims is at a historical low from an absolute standpoint, even before comparing to significant population and labor force growth. Below are various measures of year-on-year wage growth, and while it is certainly picking up, we are a far cry away from historical levels of wage growth. This suggests to us that we will likely see this series rise.

                                    Bottom line: Wage growth is certainly important, and the data are showing that pressure is building. Just as important as large national statistics are anecdotes on upward minimum wage pressure that impact the low- and lowest-income segments of the population.

                                    Tomorrow, we will continue with our look at inflation with a closer look at wage inflation, and the resulting impact on spending, the economy, interest rates and credit quality.

                                    Henry Peabody, CFA

                                    Diversified Fixed Income Portfolio Manager

                                    Eaton Vance

                                    We believe that this short- term focus provides opportunity for contrary thinking.

                                    Latest advisory blog entry

                                    May 4, 2016 | 11:00 AM

                                    How muni defaults compare to corporate issuers

                                    The relative value of municipals to taxable bonds remains a compelling story. High-quality municipals offer yields from 89% to 103% of similar-maturity Treasurys (as of 3/31/2016), so we think relative returns in municipals are attractive.

                                    While relative return is part of the equation, relative risk matters as well. Higher returns are only a bargain if they come without higher risk profiles. So it is important to consider relative risk when comparing investments. At first blush, our comparison of AAA-rated corporates and BBB-rated municipals seems like an apples-to-oranges mismatch, but it may not be.

                                    Investors may be surprised to learn that according to Moody’s, the historic 10-year cumulative default rate for Baa-rated municipals is 0.37% and the historic 10-year cumulative default rate for AAA corporates is 0.48%. Municipals with the lowest tier of investment-grade ratings have had less of a chance of defaulting than corporate bonds with the highest credit rating. This is a stunning statistic, but there are several reasons why this is true.

                                    Prior to 2010, Moody’s had rated municipal bonds on a separate scale. Municipal ratings were a good barometer of risk within the municipal market, but were not comparable to other fixed-income ratings. Since 2010, Moody’s has been recalibrating municipal credit ratings to enhance comparability. It is likely that when considering 10-year cumulative default rates, the credit quality of municipals may have been understated. In addition, the pool of AAA-rated corporate issuers is relatively small. As with any statistical analysis, outliers can exert greater impact on a small sample set. It is worth remembering, however, that only one of the companies that made up the Dow 40 in 1910 is still listed, while the largest 40 cities in 1910 are all still in business (even Detroit).

                                    Bottom line: When it comes to relative risk, municipals have historically been safer than even better-rated corporates. When they offer more attractive relative yields for less relative risk, it means that it may be time to talk about them with your relatives.

                                    Evan Rourke, CFA

                                    Municipal Portfolio Manager

                                    Eaton Vance

                                    Municipals with the lowest tier of investment-grade ratings have had less of a chance of defaulting than corporate bonds with the highest credit rating.

                                    Latest advisory blog entry

                                    May 3, 2016 | 10:45 AM

                                    Puerto Rico defaults on its biggest payment yet

                                    Puerto Rico’s Government Development Bank (GDB) on Monday paid $22 million in interest on $422 million due, therefore defaulting on $400 million in principal. This becomes the largest and most significant default for the island.

                                    Monday’s default is significant because the GDB has historically operated as the territory’s financing arm. Previously, defaults were limited to the Commonwealth’s Public Finance Corporation, Highways and Transportation Authority, Rum Tax and Convention Center debt.

                                    Governor Alejandro Garcia Padilla announced a moratorium on the GDB payment on Monday, stating he would rather provide essential services to the Commonwealth’s citizens than pay the island’s creditors. Padilla also warned that more defaults on Puerto Rico’s debt would come on July 1 unless Congress acts to help the island’s various issuers restructure debt.

                                    Thus far, the federal government has done little to help Puerto Rico address its fiscal crisis. Most recently, Debtwire reported last Friday that the U.S. Treasury pressured Puerto Rico to default on the entire GDB payment in order to force congressional action. A bill to help Puerto Rico address its financial crisis has languished in the House after the Natural Resources Committee canceled a vote due to lack of bipartisan support.

                                    So what’s next for Puerto Rico? Clearly, the crisis continues to escalate. The next key deadline for Puerto Rico is July 1, when $1.9 billion in debt service payments from 14 different Puerto Rico issuers – including $780 million in general obligation (GO) payments – comes due. This could very well serve as the force that compels action from Congress.

                                    From our perspective, it is a positive sign that the broad municipal bond market has not reacted negatively to the news. In fact, the opposite is true: Municipal bond funds have now experienced 30 straight weeks of inflows (Source: Lipper), a show of healthy demand for the asset class. In particular, demand for high-yield muni bonds has been strong.

                                    Bottom line: Five unique Puerto Rico issuers have now defaulted on their debt since August 2015. However, we view the GDB default as the most severe to date, as it was historically the financing arm for the Commonwealth, its municipalities and its public corporations. Therefore, we think that additional defaults are very likely on July 1.

                                    William Delahunty, CFA

                                    Director of Municipal Research

                                    Eaton Vance

                                    We think that additional defaults for Puerto Rico are very likely on July 1.

                                    Latest advisory blog entry

                                    May 3, 2016 | 9:45 AM

                                    A shift in strategy

                                    Our disciplined investment process tends to lead to differentiated positioning within our portfolios. Our focus on profit cycles, liquidity, and sentiment has once again led us to some distinctive investment themes. One such theme is that the U.S. consumer, not the emerging-market (EM) consumer, seems to be the real growth story.

                                    Despite political rhetoric, the U.S. consumer has been the healthiest and most stable part of the global economy. Consumer discretionary stocks were the best performing U.S. sector during 2015, and have outperformed again as the market has rallied off the February lows.* A broad range of data (such as real wage growth, consumer confidence, and employment statistics) supports that outperformance.

                                    Bottom line: Despite the improvement in U.S. consumer statistics and the related outperformance of U.S. consumer stocks, investors have primarily focused on EM consumer stocks. However, the depreciation of EM currencies has caused the standard of living in emerging markets to deteriorate. U.S. consumer stocks have outperformed EM consumer stocks over the past five years by roughly 17% per year!**




                                    *The S&P 500® Consumer Discretionary Index was the best performing sector of the S&P 500® Index for the period 12/31/2014 – 12/31/15. The S&P 500® Consumer Discretionary Index also outperformed the S&P 500 Index over the period 2/11/2016 – 4/6/2016.

                                    **The S&P 500® Consumer Discretionary Index had an annualized return of 17.10% over the period 3/31/2011 through 3/31/2016, compared with the annualized return of 0.02% for MSCI Emerging Markets Consumer Discretionary Index over the same period.

                                    Performance of an index is not illustrative of any investment. It is not possible to invest directly in an index.

                                    Richard Bernstein

                                    CEO and CIO

                                    Richard Bernstein Advisors, LLC

                                    The U.S. consumer, not the emerging-market consumer, seems to be the real growth story.

                                    Latest advisory blog entry

                                    May 2, 2016 | 11:15 AM

                                    All pain, no gain with EM currency hedging

                                    Over the past three years, the U.S. dollar has strengthened significantly against most developed- and emerging-market (EM) currencies, resulting in material performance headwinds for U.S. dollar-based investors. This, in turn, has led to a growing interest in hedging the effects of currency movements on developed international equity holdings. As a consequence, many investors also wonder if they should apply a similar program to their EM assets.

                                    While this is a natural question, it ignores some of the major differences between implementing a hedging program for developed-market currencies versus doing such for EM currencies. They differ in three key ways:

                                    • Market instruments to hedge currency risk in EM are either very expensive, or simply not available, for the majority of EM countries.
                                    • The potential benefit from hedging appears to be relatively inconsistent, making the benefits from such a hedging program questionable, especially given the high cost in the current market environment.
                                    • The potential benefits from hedging in EM have historically had a strong connection with the returns of the broad market. This is a condition not present in the developed markets, and makes the decision to hedge an EM portfolio essentially a “market call” on the direction of EM. Since we believe it is impossible to consistently make such predictions correctly, we find little evidence to motivate implementing a currency hedging program in the EM.

                                    Given the historical relationship between stock price movements and currency returns in the emerging markets, we find that for many EM countries, several implementation issues make it operationally impossible to hedge many of these currency exposures. For those that can be hedged, it is expensive in the current market environment.

                                    Bottom line: If one looks at the theoretical impact from hedging currency in EM, it appears to be inconsistent over the long term, and is equivalent to making episodic market calls in the short term.




                                    Derivative instruments can be used to take both long and short positions, be highly volatile, result in economic leverage (which can magnify losses), and involve risks in addition to the risks of the underlying instrument on which the derivative is based, such as counterparty, correlation and liquidity risk.

                                    Tim Atwill, CFA

                                    Head of Investment Strategy

                                    Parametric

                                    We find little evidence to motivate implementing a currency hedging program in the EM.

                                    Latest advisory blog entry

                                    May 2, 2016 | 11:15 AM

                                    Who will emerge as the nominees?

                                    The unanimity of result in the “Acela” state primaries brings the presidential nominations into greater focus.

                                    Democrats: What we stated a year ago as very likely is now inevitable. Barring a supervening event, Hillary Clinton will be the Democratic nominee. What do we mean by a supervening event? An FBI recommendation of indictment against Clinton in connection with her private email server or her foundation qualifies. At this stage, we do not believe an indictment will be forthcoming, allowing Clinton’s nomination to go forward.

                                    Republicans: On Tuesday, Ted Cruz was mathematically eliminated from winning the nomination outright. (So, of course, on Wednesday Ted Cruz announces his vice president.) Donald Trump’s string of resounding victories brings him closer to the majority of delegates required to make him the automatic nominee. Trump now needs around 55% of votes cast in the remaining primaries to become the nominee on the first ballot.

                                    We continue to believe a contested (brokered) convention is as likely as that result. Only in the first round of votes are delegates required to vote as their states voted in the primaries. If no candidate receives a majority in the first round, then by the second (or at least the third) ballot states free their delegates to vote as they wish.

                                    After the first round of voting, delegates may choose a nominee that is not one of the candidates running (Mitt Romney and Paul Ryan have been mentioned as possibilities). Nonetheless, we believe only Trump or Cruz will emerge as the nominee.

                                    Bottom line: If Trump falls short of 50%, but, nonetheless, enters the convention with a commanding lead over Cruz – including victories in Indiana and California – then we predict he will be the nominee. On the other hand, if Cruz enters the convention with momentum and is closing the gap – winning Indiana and California – he could well be the nominee. Regardless, it will come down to that choice.




                                    Andrew H. Friedman is the principal of The Washington Update LLC and a former senior partner in a Washington, D.C. law firm. He and his colleague Jeff Bush speak regularly on legislative and regulatory developments and trends affecting investment, insurance and retirement products. They may be reached at www.TheWashingtonUpdate.com.

                                    Andrew Friedman

                                    Principal

                                    The Washington Update

                                    Donald Trump’s string of resounding victories brings him closer to the majority of delegates required to make him the automatic nominee.

                                    Latest advisory blog entry

                                    April 29, 2016 | 12:15 PM

                                    What will get markets to move again?

                                    It appears we may be nearing the limits of what monetary policy can do to get markets moving, as both the Federal Reserve and Bank of Japan (BOJ) offered statements that failed to create a spark. So what will force markets to make the next move?

                                    First, let’s take the Fed’s unsurprising move this week. The Federal Open Market Committee (FOMC) left rates unchanged Wednesday, as was widely expected. The FOMC’s latest statement did tone down recent dovish rhetoric over global risks, but the Fed still remains on guard. This suggests that the Fed is more willing to let things build up to see what will force the market to move.

                                    On the other hand, the BOJ surprised markets by not easing further to help weaken the yen. But like the Fed, this appears to be the BOJ signaling that it is waiting to see what moves the markets. It is as though central banks are handing the baton off to their respective governments. For investors, this will have significant implications.

                                    First, we need to consider that risk markets have made a stellar comeback after the worst start to the year since the Great Depression. But with both the Fed and BOJ on pause, as well as tighter labor markets in the U.S., we think investors need to start thinking about how higher inflation could be the next catalyst that forces markets to move.

                                    In its statement, the Fed noted that inflation continues to run below its 2% longer-term objective. Compare that to March, when the Fed called out a pickup in inflation. With inflation expectations so low, higher inflation is something the market is not expecting at all. We think this is the time to consider opportunities related to inflation, such as commodity-related assets.

                                    To be sure, our opportunistic investment philosophy is not about a big secular trade, such as commodities or the U.S. dollar, though those certainly play a meaningful and long-term role in our view. Our strategy is about finding undervalued gems when the market is focused on the short term. But just as importantly are the day-to-day opportunities that the market provides us. We expect this environment to continue.

                                    Bottom line: Opportunistic and value investing is about having a different mindset than the prevailing “wisdom” of the day and finding value when it is offered by the marketplace. It is about a willingness to stand out for a bit, particularly when we don’t know what will get markets to move again. Volatility breeds opportunity that a flexible strategy can capitalize on.

                                    Kathleen Gaffney, CFA

                                    Co-Director of Diversified Fixed Income

                                    Eaton Vance

                                    Investors need to start thinking about how higher inflation could be the next catalyst that forces markets to move.

                                    Latest advisory blog entry

                                    April 29, 2016 | 10:15 AM

                                    Where value persists, despite credit and interest-rate risk

                                    Today’s environment poses a unique set of credit and interest-rate risks for fixed-income investors. Profits for S&P 500 companies are expected to fall 9% for the fourth quarter, which would be the fourth consecutive quarterly earnings decline and the first such streak since the financial crisis. Tepid economic growth remains a burden on companies. At the same time, we believe the Fed is still likely to raise its target fed funds rate this year, as it is very close to achieving (and perhaps exceeding) both its unemployment and inflation targets. Though not as urgent as previously thought, fixed-income investors remain vulnerable to rising short-term interest rates.

                                    In this vein, we believe the case for high-yield bonds, floating-rate loans and municipal bonds remains intact, should short-term rates rise.

                                    As shown in the chart below, the dotted square box shows the last period (2004-2007) in which the Fed hiked its target fed funds rate. All three sectors had positive total returns during that period, so it would appear that a likely scenario of modest hikes would pose relatively little threat to returns in these three sectors.

                                    Credit concerns also remain legitimate, given continuing slow economic growth combined with a reasonable likelihood that the U.S. economy is in the latter innings of the current credit cycle. Despite this, however, in our view current valuations and income offered by below-investment-grade debt more than compensate for the credit risks assumed.

                                    Spreads on both high-yield bonds and floating-rate loans are wider than their medians over the past 10 years. Of course, spreads could always widen further, but today’s levels represent a “value cushion” that is rare – slow growth and high expected default rates are already reflected in today’s prices.

                                    Bottom line: With the interest-rate and credit risks of today’s environment, we believe the case for high-yield bonds, floating-rate loans and municipal bonds remains intact, should short-term rates rise. Active management is particularly important and relevant, given deep credit stress in particular sectors, including energy and commodities issuers.

                                    Payson F. Swaffield, CFA

                                    Chief Income Investment Officer

                                    Eaton Vance

                                    We believe the case for high-yield bonds, floating-rate loans and municipal bonds remains intact, should short-term rates rise.

                                    Latest advisory blog entry

                                    April 28, 2016 | 4:30 PM

                                    Not your father’s dividend stocks

                                    Not so long ago, investing in high-dividend stocks was a form of value investing. Since the financial crisis, however, the composition of the dividend segment of the equity market has changed. In general, it now contains more risk and less value.

                                    At the individual security level, we believe most investors are best served by not “reaching for yield.” At the portfolio level, however, there are various steps investors can take to potentially augment the natural yield coming from their favorite stocks. They range from the mundane to the more exotic:

                                    • Consider international stocks: By allocating a portion of their equity exposure to non-U.S. stocks, many investors may see a pickup in yield. For example, the MSCI EAFE Index of developed-market stocks in Europe, Australia and the Far East has a dividend yield of 3.5%, roughly 1.4% more than the S&P 500.
                                    • “Capture” dividends: Depending on a U.S. investor’s holding period, dividend income can be treated as “qualified”* and taxed at lower rates (currently the same rate as long-term capital gains). The investor can then “roll” the proceeds into another dividend-paying stock to repeat the process. There are transaction costs associated with this strategy, and stock prices often fall by the amount of the dividend payment on the ex-date. But, there is research suggesting this strategy has historically produced market-beating returns.
                                    • Consider an allocation to high-yield bonds: High-yield bonds are often viewed as the equity market’s close cousin due to their higher potential for risk and reward. In February 2016, yields on these bonds had reached high single-digit levels. If appropriate, equity investors can supplement their yield requirements with a modest allocation to this asset class, while still retaining ownership of their favorite lower-yielding growth stocks.

                                    Bottom line: Dividend investing has changed through the years and, as a result, so too should investors’ approach to it. In our judgment, investors should focus primarily on the sustainability of a company’s dividends, rather than the sheer size of its dividend yield. More specifically, look at the company’s underlying fundamentals to gauge its ability to maintain–and grow–its dividend payments over time. These strategies should be undertaken with the help of a professional advisor who has expertise in these areas.




                                    *Qualified dividend income (QDI) is dividend income to which long-term capital gains tax rates are applied (as opposed to higher regular income tax rates). To qualify, the dividends must be paid by an American company or a qualifying foreign company and must not be listed with the IRS as dividends that do not qualify. In addition, the required dividend holding period must have been met.

                                    Edward J. Perkin, CFA

                                    Chief Equity Investment Officer

                                    Eaton Vance

                                    There are various steps investors can take to potentially augment the natural yield coming from their favorite stocks.

                                    Latest advisory blog entry

                                    April 28, 2016 | 12:00 PM

                                    The Fed is a lagging indicator

                                    We spend considerable time determining whether indicators are leading, lagging, or coincident. However, as investors, we don’t really care whether indicators lead or lag the economy. Rather, we care whether they lead or lag the financial markets.

                                    With that in mind, investors may be paying too much attention to the Fed. Of course, the Fed is hugely important for the economy and the markets, but it is critical to remember that the Fed is actually a lagging indicator. We expect that to be the case throughout this cycle as well.

                                    Since the Fed began to target the Fed Funds rate in the early-1980s, the Fed has never led the markets either when raising rates or lowering rates. There have been a couple of instances when one could argue that the Fed’s moves were coincident with the markets’, but the Fed typically lags the markets. Sometimes, the lag is as long as a year or more.

                                    The Fed’s recent guidance seems to be following the historical norm. The uncertainty surrounding the U.S. and global economies is preventing the Fed from being the leading indicator that some would like them to be. Recent comments indicate that the Fed may prefer lagging. If the Fed tightens monetary policy too early or too quickly, then they feel they may put the global economy at risk. However, if they tighten too late or too slowly, they feel they can always react to inflation and increase the pace and magnitude of rate increases.

                                    Bottom line: The current Fed’s perceived risk and return seems similar to those of past Fed regimes. With the exception perhaps of the Volker Fed, the Federal Reserve has historically responded to economic conditions rather than set them. The current Fed’s “data dependency” is really nothing new.

                                    Richard Bernstein

                                    CEO and CIO

                                    Richard Bernstein Advisors, LLC

                                    The Federal Reserve has historically responded to economic conditions rather than set them.

                                    Latest advisory blog entry

                                    April 27, 2016 | 5:00 PM

                                    Fed in wait-and-see mode until June

                                    Today, the Federal Open Market Committee (FOMC) stood pat with interest rates as expected, leaving the door open for a possible June rate increase. However, while not as dovish as the Federal Reserve’s statement in March, the Fed certainly does not seem committed to a rate increase in June.

                                    Here are the important points I collected from the FOMC’s statement:

                                    • Worries over global conditions have been downgraded. Today’s statement has less of a focus on global economic and financial developments compared to the Fed’s March statement. That said, the statement did say that the Fed would closely monitor global developments.
                                    • The Fed did point out the strength of the job market, noting that conditions have improved further even as growth in economic activity “appears to have slowed.” To me, that suggests the Fed is willing to look past negative GDP data for the quarter somewhat and instead focus on the strong labor market.
                                    • The Fed clearly wants more inflation. In March, the Fed’s statement noted a pickup in inflation; in today’s statement, the FOMC noted that inflation continues to run below its 2% longer-term objective.

                                    Overall, there was not much that is very exciting in today’s FOMC statement. It’s very much along the lines of what I was expecting.

                                    Bottom line: The Fed is now in wait-and-see mode until June. While today’s statement could be viewed as more hawkish than the one delivered last month, the Fed does not appear committed yet to a June rate hike.

                                    Eric Stein, CFA

                                    Co-Director of Global Income

                                    Eaton Vance

                                    The Fed certainly does not seem committed to a rate increase in June.

                                    Latest advisory blog entry

                                    April 26, 2016 | 10:15 AM

                                    How the DOL fiduciary rules impact 401(k) assets

                                    Shortly after the Department of Labor (DOL) issued much-anticipated final IRA fiduciary rules, we noted that we believe the most important change is the final rules’ acknowledgement that differential compensation (including commissions) may be appropriate for the sale of different categories of investment products. There are other major changes in the final rules, including some that impact 401(k) assets.

                                    The final rules make clear that recommendations to roll over 401(k) assets to an IRA are subject to the fiduciary rules. Thus, firms must comply with the best interest contract (BIC) exemption with respect to rollover advice. The rules acknowledge that a decision to move assets out of a 401(k) may be based on factors other than fees, such as a broader range of investment choices or more personalized investment advice.

                                    The advisor must document why the rollover makes sense in the client’s case, perhaps based on factors such as greater investment options or a higher degree of service.

                                    Bottom line: It appears to us that 401(k) rollover disclosure and compliance will become similar to those involved in advising clients now on a 1035 exchange of annuities: the advisor will be required to set out the pros and cons of the change and the reasons why the change is appropriate in the client’s circumstances.

                                    Andrew Friedman

                                    Principal

                                    The Washington Update

                                    The final rules make clear that recommendations to roll over 401(k) assets to an IRA are subject to the fiduciary rules.

                                    Latest advisory blog entry

                                    April 26, 2016 | 10:00 AM

                                    A secret G20 currency agreement?

                                    Over the past few months, market participants have widely discussed the possibility of an accord at the February G20 meeting in Shanghai to keep the U.S. dollar from appreciating too quickly. If true, what would be the impact on financial markets and the world economy from this type of coordination?

                                    The thinking goes like this: A strong U.S. dollar is negative for emerging-market countries with a large amount of dollar-denominated debt. If the U.S. dollar were to rise significantly in value, we might see a repeat of China’s actions last August, which would prove to be negative for risk markets and the world economy. Therefore, the Fed should be cautious in raising rates so as to not push the U.S. dollar significantly higher, and other major central banks would focus their additional monetary stimulus on domestically oriented policies and be less focused on weakening their currencies so as to not exacerbate any potential so-called currency wars.

                                    The belief of an informal agreement at the G20 meeting is supported by the newfound dovishness from the Federal Reserve. In particular, Fed Chair Yellen’s significantly more dovish tone during a March speech at the Economic Club of New York lends credence to the idea that an informal deal was struck. Since the February Fed meeting, the U.S. dollar has weakened somewhat, giving credence to the view that U.S. dollar weakness is primarily Fed-driven.

                                    Unlike the Plaza Accord in 1985, when a formal deal was established between the five governments to intervene and depreciate the U.S. dollar (or the Louvre Accord in 1987 to stop the dollar’s decline), there was no official deal or announcement in February, so investors are left to speculate on any agreement. Personally, I do believe that there was some at least informal understanding reached at the G20 meeting.

                                    While this agreement would be positive for EM countries who had seen significant currency depreciations over the past few years and China which has been able to weaken its currency vs. a basket of other currencies (but not the U.S. dollar), other developed markets are likely not happy. In the eurozone and Japan, as well as Australia and New Zealand, countries are working to weaken their currencies in an orderly fashion using monetary policy, so they do not want to see their currencies strengthen relative to the U.S. dollar. So it is unlikely that this equilibrium will last over the long term, particularly if Europe and Japan continue to fall short of their inflation targets, as no country really wants to see its currency strengthen in a low-inflation world.

                                    Bottom line: The dollar is certainly less attractive under a more dovish Fed. From an investment perspective, Fed dovishness should be supportive of global credit markets as well as emerging-market assets and TIPS. However, should the Fed begin to become more concerned about the inflation outlook, some of these recent market trends could easily revert.

                                    Eric Stein, CFA

                                    Co-Director of Global Income

                                    Eaton Vance

                                    The belief of an informal agreement at the G20 meeting is supported by the newfound dovishness from the Federal Reserve.

                                    Latest advisory blog entry

                                    April 25, 2016 | 12:45 PM

                                    What’s next for the BOJ?

                                    The Bank of Japan (BOJ) meets later this week to discuss monetary policy, with many expecting the central bank to ease further. Given that the yen continues to strengthen even as the BOJ has embraced negative interest rates, what can Japan do to weaken its currency?

                                    First, I do think the BOJ will ease in the near future, with this week certainly a possibility. BOJ Governor Haruhiko Kuroda has been aggressive in his recent rhetoric. I think it’s likely the central bank will do something to drive equity prices higher, likely through more equity purchases. By driving equity prices higher, Kuroda may hope to weaken the yen, or at least keep it from strengthening further.

                                    To many investors, this may sound like the BOJ is reaching the limits of its powers, leaving many to wonder what it would take for the BOJ to weaken the yen. I think that there are three ways the yen could weaken from here:

                                    • Japanese money starts to significantly flow out of Japan into other countries.
                                    • Equity strength leads to yen weakness. Traditional thinking would have it the other way around, but I think correlation could go this way.
                                    • U.S. Treasury yields start to rise, which has historically been associated with a weaker yen.

                                    Bottom line: Negative rates seem to have backfired on the BOJ from both a Japanese yen and equity perspective. With a statement on monetary policy due out on Thursday, I do expect the BOJ to try something else to weaken the yen.

                                    Eric Stein, CFA

                                    Co-Director of Global Income

                                    Eaton Vance

                                    Negative rates seem to have backfired on the BOJ from both a Japanese yen and equity perspective.

                                    Latest advisory blog entry

                                    April 25, 2016 | 9:15 AM

                                    “Staying small” with emerging-market debt

                                    The start of 2016 has marked something of a comeback for emerging-market (EM) debt, which has advanced 13.4% for the year to date through April 20, based on the JPMorgan Government Bond Index-Emerging Markets (GBI-EM). This follows a difficult three-year stretch ending on December 31, in which the GBI-EM gave up almost a third of its value, hurt by sluggish global growth, falling commodities prices and a strong U.S. dollar.

                                    While a tail wind for the asset class is beneficial, we believe that investors tempted to increase EM exposure should carefully consider their investment approach. This is especially true given the expansion of the sector and the proliferation of EM indexes over the past two decades. For example, the first popular EM index – the JPMorgan Emerging Market Bond Index (EMBI) – was introduced in 1991 and comprised only government dollar-denominated debt. The GBI-EM followed in 2005 and comprises local currency sovereign debt. Today, the EM index set also includes proxies for corporate debt as well as lower-rated sovereign issuers.

                                    (See our white paper, “Emerging-market debt: Breaking through the benchmarks,” for a fuller discussion.)

                                    The newer indexes are useful in that they represent additional factors that can drive performance – foreign currencies, credit and lower-rated sovereign debt. However, investing in EM by allocating to indexes is essentially a top-down approach that, in our view, entails a number of drawbacks. For example:

                                    • Managers must focus on macroeconomic “big things,” like U.S. Treasury yields and global monetary policy. Big things clearly affect EM prices, but with the whole world’s scrutiny, it is hard for EM managers to make money from them in a repeatable fashion.
                                    • Index countries make up a limited universe that omits about two-thirds of the $32 trillion in GDP represented by emerging and developing markets, according to the IMF (see chart).
                                    • At any given time, index countries are likely to be unattractive investments, based on valuation, creditworthiness or other metrics EM managers use.

                                    We believe a better approach is to focus on the small things, with bottom-up evaluation of all EM countries – not just those in a benchmark. This approach includes country-level macroeconomic and political research, and stand-alone analysis of specific risk factors, like interest rates, currencies, and sovereign and corporate spreads.

                                    Bottom line: Indexes may be helpful as references, but we believe that “staying small” offers the best way to unlock the potential of EM debt.

                                    Michael Cirami, CFA

                                    Co-Director of Global Income

                                    Eaton Vance

                                    We believe that investors tempted to increase EM exposure should carefully consider their investment approach.

                                    Latest advisory blog entry

                                    April 22, 2016 | 4:30 PM

                                    The importance of Argentina’s massive bond deal

                                    After a 15-year absence, Argentina is once again accessing the debt markets, a very important step for the third-largest economy in Latin America. Despite the economic challenges – as well as Argentina’s troubled history as a borrower – we think the move helps improve the country’s long-term future.

                                    First, here are the details of the largest emerging-market debt offering:

                                    • Argentina sold $16.5 billion in debt, slightly above original plans to offer $15 billion.
                                    • The government said it received $69 billion in bids, highlighting strong demand.
                                    • The 10-year debt portion of the deal sold with a yield of 7.5%, which is still relatively high compared to other emerging-market countries in Latin America.
                                    • Demand in the secondary market was also robust, as bonds traded higher after the offering and yields dipped.

                                    For Argentina, the debt deal begins to put a creditor holdout issue into the rearview mirror. Argentina has defaulted on its debt eight times, most recently in 2014, which led to a contentious battle with creditors. A majority of proceeds from this week’s debt deal will be paid to these holdout creditors, removing a barrier to economic growth.

                                    Argentina does have several more hurdles to clear as it works to overhaul its economy. The country is running a fiscal deficit, growth is expected to contract and inflation is running close to 30%. For long-term investors, though, reforms are starting to bear fruit.

                                    In December, Mauricio Macri took over as president, immediately helping to lead Argentina’s reform efforts. As such, we believe that Argentina is one of few positive reform stories in emerging markets. This need for differentiation between positive and negative reform stories highlights the importance of country picking.

                                    We believe that investors need to study macroeconomic and political fundamentals of countries around the world in order to find opportunities in developed, emerging and frontier countries. For example, we think there are many opportunities that lie outside of emerging-market benchmark indexes, like the JPMorgan Government Bond Index-Emerging Markets (GBI-EM), which does not include Argentina’s sovereign debt.

                                    Bottom line: Argentina has taken a very important first step in its economic liberalization. To find opportunities like this, we think investors need to rely on country picking and selection by a professional, experienced manager. We believe that a bottom-up focus can lead to total return and diversification opportunities.

                                      John Baur

                                      Director of Global Portfolio Analysis

                                      Eaton Vance

                                      We think the move helps improve the country’s long-term future.

                                      Latest advisory blog entry

                                      April 22, 2016 | 11:30 AM

                                      The Fed won’t end the party

                                      With a two-day policy meeting next week, there has been lots of chatter in markets recently about the future course of the Federal Reserve’s monetary policy. And since the March FOMC meeting, the chatter certainly has gotten significantly more dovish.

                                      That’s particularly true for Fed Chair Janet Yellen, who has been very focused on a number of factors outside the U.S. economy: the international situation, the U.S. dollar and China, probably more so than the U.S. domestic economy. These factors, along with many others, have tilted Yellen toward a more dovish stance of monetary policy.

                                      So, at the end of the upcoming meeting, I expect the Fed to stand pat and to not make any policy changes. In addition, I do expect the central bank to keep the door open for a possible June rate increase, although I do not believe it will commit to it.

                                      The Fed is very focused on financial conditions, which have eased since the March policy meeting. The U.S. dollar has weakened, commodity prices have climbed, credit spreads have tightened and the U.S. equity market is at its highest point of 2016.

                                      Bottom line: If this continues, I could see the Fed raising rates in June, but I don’t think Fed members want to quiet the party in capital markets too much. So, I think they’ll leave the door wide open.

                                      Eric Stein, CFA

                                      Co-Director of Global Income

                                      Eaton Vance

                                      I don’t think Fed members want to quiet the party in capital markets too much.

                                       

                                      loading

                                      We apologize for the inconvenience but we are experiencing a technical issue.

                                      We are working on a solution. Please try again later.

                                      If you require further assistance, please call:
                                      1-800-836-2414.

                                      You have already upgraded your account. Please login using the link at the top of the page.

                                        Your download will begin when this window is closed.

                                        You have successfully un-subscribed from .

                                        As a subscriber, you are one step away from getting more access and control. Register now by simply creating a password below.

                                        Passwords must be 8 to 20 alphanumeric characters, including a special character:
                                        ! @ # $ % ^ & * ( ) - _ = + , < . > ?.

                                        Cancel

                                        Trouble registering? Call 1-800-836-2414.

                                        Congratulations! You are registered.

                                        We have sent a verification email to . Please check your e-mail and click on the secured link to verify your account and complete the registration process.

                                        Trouble receiving the verification email? Call 1-800-836-2414.

                                        Congratulations!

                                        We are pleased to grant you access to this Eaton Vance website.

                                        Please click here to be logged in with your username .

                                        A verification email has been sent.

                                        You have requested a change to your password. In order to process this request, a verification email has been sent to . When you receive this email, please click the link contained within the email to start the password reset process.

                                        Trouble signing in? Call 1-800-836-2414.

                                        This account is restricted.

                                        Your account has limited access. You currently have access to content for:

                                        Firm restriction.

                                        This document has not been approved at your firm. We can not complete your subscription request at this time. Please try again later.


                                        If you need further assistance, please call 1-800-836-2414.

                                        This account has been updated.

                                        Your account has been updated to use your new email address .

                                        We have sent a verification email to with a verification link to confirm the change.

                                        Trouble receiving the verification email? Call 1-800-836-2414.

                                        This email account has not been verified.

                                        Your account has not yet been activated. We have sent a verification email to . If you'd like us to resend this, please click the Resend Email button below.

                                        Trouble receiving the verification email? Call 1-800-836-2414.

                                        Cancel

                                        Thank you.

                                        An e-mail verification has been re-sent to . Please check your e-mail and follow the instructions to complete the registration process.

                                        Trouble receiving the verification email? Call 1-800-836-2414.

                                        An email has been sent to the email address containing a link to verify your credentials. Please check your e-mail and click on the secured link to complete your request.

                                        Trouble receiving the verification email? Call 1-800-836-2414.

                                        Re-verification Required

                                        For security purposes we could not complete your request. Please click here to receive a new link to access the requested content.

                                        A new email has been sent to the email address containing a link to re-verify your credentials. Please check your e-mail and click on the secured link to complete your request.

                                        Trouble receiving the verification email? Call 1-800-836-2414.

                                        Verification Accepted

                                        You have been granted access to the requested content.

                                        Remember Me

                                        Click here to remain recognized on this device for future visits to EatonVance.com

                                        Do Not Remember Me

                                        Click here if you are using a Public Computer or Shared Device.

                                        Trouble receiving the verification email? Call 1-800-836-2414.

                                        Cancel

                                        Subscribe to new content: Register

                                        Please check the Fund Literature that you would like to subscribe to. Your subscriptions can be managed on your profile page.

                                        Subscribe All

                                        Thank you for downloading

                                        If your download did not start automatically, please click here.

                                        Stay on top of your game.

                                        Receive email notifications when the  is updated by clicking the subscribe button.

                                        Close

                                        Thank you for subscribing

                                        We have sent a verification email to . Please check your e-mail and click on the secured link to verify your subscription.

                                        Un-subscription request

                                        We have sent a verification email to . Please check your e-mail and click on the secured link to verify your request.

                                        Stay on top of your game.

                                        You have selected to receive email notifications for:

                                        Cancel

                                        Subscribe to new content: Register

                                        Stay on top of your game.

                                        You are currently "Opted Out" of all Eaton Vance email communications. If you would like to be alerted of updates to your new subscription, please Opt In:

                                        Close

                                        Enter your e-mail address to reset your password.

                                        Already have an account?
                                        Subscribe to new content: Register

                                        Trouble registering? Call 1-800-836-2414.

                                        Simply enter your e-mail address to register.

                                        Cancel

                                        Already have an account?

                                        Register for more access and control.
                                        • Elevate your business practice with materials from the Advisor Institute.
                                        • Learn more with exclusive videos, conference calls, and the latest insights.
                                        • Follow products, get product notifications, and manage your Eaton Vance communications.
                                        Please wait while the data is being prepared for download.
                                        loading
                                        This message will automatically close when your file is ready.
                                        Please enter a new email.

                                        Trouble signing in? Call 1-800-836-2414.

                                        Investment Professionals

                                        Register Now

                                        Already have an account? .

                                         

                                        Symbol:  

                                        NAV as of