Chi Time: What’s new in China’s 2019 outlook?
On credit, emerging markets and the US dollar
High levels of local concentration suggest employers have market power
Out now: our take on markets and the economy and our asset class expectations
If you can, help others; if you cannot do that, at least do not harm them. - Dalai Lama Summary The Sino-US trade tension risks escalating to a new cold war, which could cost not only China and the US, but also the world economy, dearly. Collateral damage to the global system could be another round of currency war in the short term with new volatility dynamics coming from China. If the end of the last Cold War fostered global economic integration, the beginning of the next one - between China and the US - will likely produce fragmentation, with long-term consequences on even technological innovation and climate change.
Equity markets' usual year-end Santa Claus rally might get an additional boost
The primary themes impacting the yields of US Treasuries and the pricing of future levels of inflation (via breakeven inflation rates (BEIs)) have changed little in the last few months. They continue to generate a range-trading environment for US Treasury bonds and TIPS.
A look at developed and emerging equity valuations to assess which now appear attractive, at least from a stock multiples viewpoint
Small caps are trading at a discount to large caps
Growth dynamics and demographics add to the arguments in favour
There is no longer just a single EM group, with poor countries converging to industrialized status slowly and surely over time, and advanced emerging markets graduating to developed countries. With a deeply skilled ESG research team, we have amassed the data and monitoring capabilities to tailor and craft a unique approach suited to the nuances and dynamic realities of emerging markets. The novelty of our approach is that instead of inclusion lists or exclusion lists, we use our composite score on each of the 90 EM countries to determine position sizing for investments in our portfolios. We must look to the future and take a stand on the implications of our enterprise and the long-term viability of our holdings.
We remain long equities and underweight fixed income, notably in the eurozone, but we trimmed our risk exposure
Read our white paper on the potential of AI and the opportunities it offers investors
Emerging market debt has been the subject of much interest over the last few years, but recent volatility has created uncertainty about the asset class. We are convinced that besides offering an attractive return/risk ratio and the potential for high returns, current valuations constitute an attractive entry point.
Watch out for the effects of factors such as rising interest rates and the end of central bank asset purchases
Infrastructure debt offers investors attractive features from steady cash flow to credit quality
Foreseeing calmer markets over the next few months, we have identified several reversal themes
Does the FOMC hope that with only moderate policy tightening, it can eventually succeed in returning US inflation to objective after an overshoot?
The financial sector had been assumed to be one of the equity sectors that would outperform the broad S&P 500 index in 2018. Robust US economic growth following the passage of tax cuts would boost cyclical sectors and deregulation would enhance profits. But instead of market-beating returns, the sector’s total return up to 27 June was -4.3%, compared to a 3.0% gain for the rest of the index. What are the reasons for the disappointing figures? Might things turn around by the end of the year?
Hopes were so high. At the start of the year, the ‘Goldilocks’ environment — characterised by above-trend global growth, contained inflation, and moderate volatility — looked set to continue, if not quite as strongly, in 2018.
Taking a closer look at how the tariff cards may play out and which markets may suffer the most should things get nasty
How can foreign currency exposure best be managed in institutions’ portfolios?
What are the implications of recent political events in Italy, deepening trade tensions and the June FOMC meeting?
At the 13 June meeting, the Federal Open Market Committee raised the target range for the federal funds rate by a quarter point to 1.75-2.00%, marking the seventh increase in US interest rates of the current cycle.
In China, policy is driving the push to cleaner energy, but the setup in India makes the transition tougher
When leading central banks stop playing the monetary policy tunes that many financial markets have been dancing to over the past decade – that jaunty ditty called quantitative easing, or QE as it is known by its abbreviation – the financial assets that were the winners under QE look set to become the losers, but there is one asset class that should continue to hum along nicely: US mortgage-backed securities (MBS), as fund manager John Carey explains.
Green bonds are meant to (re)finance projects with the ultimate goal of combating climate change or mitigating its impact
Three shocks hit markets: (i) an escalation of political risk, (ii) weakening growth (notably in Europe); and (iii) a stronger USD, which led to stress in emerging markets In Italy, market worries about fiscal excesses and the prospect of a clash between the new government and European authorities escalated. As a result, ‘peripheral’ eurozone debt sold off. Italian markets are likely to remain volatile in coming months as investors digest further news on political developments and economic data There are signs of a growth slowdown, notably in the eurozone, according to recent data. However, we find it difficult to call a turn in the economic cycle yet. While the data have weakened, activity is still expanding both in the developed world and emerging markets Emerging market stress was largely a consequence of higher US yields and USD strength. In our view, local debt offers value and currently lower US yields are reassuring, but we need to see the USD and global risk sentiment stabilise for EM debt to rally materially
Cooling growth, inflation becoming ‘too hot’ - what is the outlook for Goldilocks?
Inclusion of mainland-listed stocks marks milestone in the opening of China’s financial markets
"If you can't re-use it, refuse it"
How did the largest drop in nearly two years start and when will it end?