Insight Investment Australia

Christopher Broadley, portfolio manager, said: “Efforts to revive China’s economy are paying off, with monetary and fiscal stimulus powering Chinese equities to their second-best month of returns in five years in September. The equity market had been shunned by investors since the global reopening from Covid, with underperformance compounded by a major property slump. Questions remain around the long-term growth outlook, but these new measures have certainly bolstered this previously stumbling economy. Within our portfolios, we have positioned for further volatility, benefitting from outsized moves in either direction.” Click here to see our chart of the week: https://bit.ly/3xRnT6t For wholesale investors only.

The RBA is likely to be one of the last developed-market central banks to cut rates after it left rates unchanged at its September meeting. The RBA spoke of a six-month window for its next rate cut, a view we concur with, as the bank needs to be confident inflation has returned to target on a sustainable basis. Australian government bonds have underperformed since the Federal Reserve lowered interest rates by 50 basis points. However, we believe Australian government bonds now offer compelling value on a relative-value basis. For wholesale investors only.

“We love the high yield space. From the public markets side, it is the most beautifully inefficient market and inefficiency is where investors can look for opportunities to exploit,” said Insight’s Paul Benson, Head of Systematic Fixed Income, speaking on CNBC’s Squawk Box Asia. “Most market participants would say spreads are tight. But spreads are tight for a reason. The economy is facing some downside risk but its controllable and these spreads are compensating for default risk and liquidity risk. Both of these have come down and are meaningfully lower than participants expect.” Read more here: https://cnb.cx/3MP9ADA For wholesale investors only.

Anticipation is high ahead of this week’s Fed decision to cut either 25 or 50 basis points, with the S&P 500 close to record highs overnight. As Steve Waddington, Co-Deputy Head, Multi-Asset Strategy Team, points out in this The Australian article, initial expectations were for a 50bps cut amid early August turmoil, but the subsequent market recovery and higher US Core CPI last week saw market pricing move back towards 25bps. As a result, the outcome this week is set to be a significant surprise—the biggest in 15 years. Read more here: https://bit.ly/3znVTbW For wholesale investors only.

Did you know that recovery periods for high yield bonds are typically shorter than equities? Notably during the GFC it took equities several years longer than high yield bonds to recover. High yield bonds also have softer falls than equities during crises over the past 20 years. Watch the full webinar here: https://bit.ly/3yKs58S For wholesale investors only.

Christopher Broadley, portfolio manager, said: “Marginally positive returns across equity markets in August masked significant intra-month volatility, with some indices experiencing drawdowns of between 5%-10%. Japanese equities were a stand-out, with the Nikkei 225 posting its worst 3-day performance on record. The volatility of Korean and Taiwanese equity markets, and the US small-caps and US tech sector, were also notable. Given that two-way risks to growth have become more balanced over recent months, we have trimmed some exposure in equities and edged up duration.” Click here to see our chart of the week: https://bit.ly/3xRnT6t For wholesale investors only.

"Artificial intelligence has a place in the future development of quant strategies, but we take a cautious approach to it. Everything we do from an investment perspective has to be intuitive. It has to have understandable underlying economic principles. If we can't understand it, then we will not invest." Paul Benson, head of systematic fixed income, Insight Investment. Watch the full webinar here: https://bit.ly/3yKs58S For wholesale investors only.

Shantanu Tandon, portfolio manager said: “Market implied US policy rate expectations continue to build in a 100bp reduction in rates by end 2024, double the magnitude expected in June. The big question is whether September’s cut will be a 25bp or 50bp move, with markets tilting towards the former. Either way, the start of the easing cycle should help to support risk assets, and we remain constructive for now." Click here to see our chart of the week: https://bit.ly/3xRnT6t For wholesale investors only.

In the 24 months after fallen angel bonds are downgraded their spreads steadily narrow, data shows. We believe a key factor in this trend, which is demonstrated over the past 20 years, is due to the overselling that occurs when the bond is downgraded. Watch the full webinar here: https://bit.ly/3yKs58S For wholesale investors only.

Higher bond yields change asset allocation assumptions. In 2022, a portfolio of 66% equities, 30% alternatives and 4% bonds would produce an annual 7% return, according to investment consulting firm Callan. In 2024, that return could potentially be achieved with much lower risk – a portfolio of 52% bonds, 33% stocks and 15% alternatives. Watch the full webinar here: https://bit.ly/3yKs58S For wholesale investors only.