Insights

09/16/2024 Investment Talks

Passive to Active: Words of Wisdom from Ted Lasso

Passive strategies have generally have fared well over the past decade, which has made it easy to forget the long periods during which active managers outpaced passive approaches. The reasons we believe market concentration will decline include (1) a shrinking earnings advantage for the top ten companies, and (2) seemingly unsustainably high valuations. We believe investors may benefit from investing with active managers that thoughtfully select their exposure based on the earnings and valuation profile of each stock.

09/11/2024 Investment Talks

US election debate generates more political than policy buzz

The first debate between US presidential candidates Trump and Harris was a fractious exchange that shed little new light on policy details. Democratic candidate Kamala Harris was deemed to have performed better than her Republican rival Donald Trump, according to snap polls conducted after the debate. This implies that Harris will likely see an extension of the honeymoon period that has dominated since her nomination. While the US election debate was relatively disciplined and covered all the major domestic and foreign policy issues, it was light on the two candidates' policy agendas as both stuck to high-level answers with little in the way of specific measures or details of how they would accomplish their objectives.

09/09/2024 Global Investment Views, Equity, Fixed income

A summer of reality checks on market expectations

Markets are shifting their focus to economic growth as inflation continues to decline. The primary reason for this shift seems to be weakening consumption, which is now extending to wider sections of the economy. We believe this environment calls for a more prudent stance, and a tactical, incremental risk reduction rather than a structural de-risking. Overall, we are marginally positive on risk assets and suggest staying well-diversified. At the same time, we remain vigilant after the recent yield movements and are wary of potential fiscal risks.

09/06/2024 Investment Talks

Pursuing Sustainable Income with a Multi-Asset Approach

While today’s capital market valuations reflect the general optimism that a recession can be avoided, we believe activity levels may continue to deteriorate during the months ahead. The rise in the cost of money during the past two years has proven moderately effective at crowding out spending by both consumers and corporations alike. We suggest investors keep this prospective outcome in mind as they evaluate potential investment strategies. By placing focus on a solution with less sensitivity to index composition, managers and investors are able to emphasize areas of markets with greater opportunity, while avoiding others where the risk and reward balance is unfavorable.

08/19/2024 Research / Market

The Artificial Intelligence Revolution: Sector Perspectives

We believe that Artificial Intelligence (AI) could have over the long-term a positive impact on productivity and GDP growth. However, the impact will not be linear across sectors, especially in the early phases. There will be winners and losers in most industries. To be a "winner" a company needs not only to be an early-mover in terms of investing in AI, but also possess a proprietary data advantage, an existing competitive edge based on market position and an ability to innovate successfully. Otherwise, any advantages from using AI technologies could be competed away. In our view, the future winners are most likely to be found among the existing competitively-advantaged companies.

08/05/2024 Investment Talks

US economy worries pummel markets

Global stocks fell sharply at the start of the week, with Japan’s benchmark Topix index on Aug. 5 suffering its biggest one-day drop in more than three decades. European shares and U.S. stock futures also declined. Meanwhile Emerging Markets stock indices, mostly in Asia (Taiwan and South Korea), fell into the red and currencies that had benefited from high carry trades funded by the yen, such as those in Latin America, lost ground.

08/01/2024 Global Investment Views, Equity, Fixed income

Rotation and broadening in equities has started

US mega caps significantly outperformed the rest of the US markets in the first half of the year, driven by better-than-expected economic activity, exuberance over artificial intelligence and superior earnings. Looking ahead, we see a potential for a rally broadening, which will not be linear and is likely to have multiple legs. Some early signs of this rotation materialized recently after the July consumer price index report raised the chances of a Fed rate cut in September, while most recently fears on restrictions on the chip industry further supported this trend. This opens up opportunities into areas and segments (small caps, Europe, Japan) that have been left behind.

07/29/2024 Cross Asset

How long can the central banks’ divergence last

The global macro backdrop – inflation scares, geopolitical tensions and recession worries – together with US economic resilience, have supported the dollar versus core currencies, but the latter are not weak relative to recent history. Moreover, the difference in market expectations of terminal rates in Europe are now substantially higher than before the pandemic, and not materially different from expected US terminal rates. This should limit any sustained weakness in European exchange rates.

07/22/2024 Investment Talks

Biden's exit from the presidential race opens a phase of uncertainty

Market reaction to Biden's announcement has been muted at the time of writing, with a fall in the US dollar in early trading on Monday (July 22nd), a marginal movement in 10-year US Treasuries, and an upward trend in equity futures. In terms of the implications on markets, the election outcome is still highly uncertain. It is too early to define a potential "Harris trade," but even to have a specific trading strategy for a potential Trump 2.0 administration, as there is ideological uncertainty regarding its goals and policies. There are also significant ideological clashes that the Trump administration would need to address, such as the approach towards China, inflation, tariffs, fiscal expansion and the desire for a weaker dollar.