London & Capital Wealth Management’s Post

Don't think twice, it's all right - An improving inflation outlook, an easing of financial conditions and signs of economic stability is making the possibility of hard landing less and less likely. The latest views from Schroders Global Unconstrained Fixed Income Team. #fixedincome #macroeconomy #investments #inflation #centralbanks

An interesting suggestion in the penultimate paragraph. Have we, as collective investors, become desensitized to chaos & uncertainty? Or just stubbornly bullish in our investing attitude? Just over the last few years we've had Covid, where markets fell sharply and recovered to end 2020 in the green. The Russia-Ukraine conflict escalated in February 2022, causing energy supply concerns and heightened inflation among major economies, markets took an initial hit and well within 2 years have recovered to surpass their pre-Feb 2022 levels. 2023 saw the collapse of Silicon Valley Bank and Credit Suisse, among others, yet markets ploughed on regardless. The behavioral aspect behind these "steel hands" are fascinating. Yet the key takeaway I pull out of this is the same as usual; - Time in the market > Timing the market - DCA is the way - Markets don't always make sense, at least in the present - And to borrow a golf analogy, Tee it high and let it fly... being able to tolerate an element of risk is crucial to long-term success

While inflation has proved surprisingly sticky, GAM Investments’ Michael Biggs explains why he believes its recent resilience really could be transitory, and outlines the opportunities he’s seeing in EM bonds. Read more here: https://ow.ly/zm7350Skbpx #AssetManagement #Investing #economy #Bonds #FixedIncome #inflation #EMdebt For professional investors only. Capital at risk.

The current backdrop of higher yields allows investors to generate income and diversify their portfolios. A focus on high-quality segments of the bond market should help mitigate any potential economic downturn.

An interesting perspective on markets, purpose, sentiment and solution: “…It’s often said that financial markets trade on fear and greed… …In his annual letter to shareholders, BlackRock co-founder and CEO Fink explains how he was startled by an article in The Wall Street Journal that examined the sense of disillusionment among Gen Z coming out of the pandemic… …Compared with 20 years ago, the current cohort of young Americans is 50 per cent more likely to question whether life has a purpose, while 40 per cent agreed with the statement that it is hard to have hope for the world… …“I’ve been working in finance for almost 50 years. I’ve seen a lot of numbers. But no single data point has ever concerned me more than this one,” Fink writes…” The solution? Growth. Fink says that if the US can grow GDP at 3 per cent for the next five years, it will keep America’s debt to GDP ratio at 120 per cent, which he describes as “high, but reasonable”…” [Larry Fink and AFR Quote] Ps. “Shocked” seems a little OTT, however sells content. #markets #riskandreturn #growth #GenZ

Our core macro view is ongoing economic growth (hence corporate earnings growth) and disinflation, that forms the basis of our positive view on risk assets. We increased our equity exposure and continue to favour the US, which is our biggest overweight. Latest earnings season provide confidence on earnings trends and the secular trend in AI is well and alive. We have upgraded UK equities to modest overweight. And while the US trades on high multiples, the reverse is true for the UK. We also liked the fact that the UK is heavily weighted in defensives and commodity exposed sectors. This makes the UK an attractive hedge against a cyclical downturn that is inflationary, as these sectors stand a good change of outperforming in that environment. We believe there is not much room for a bond rally in the near term as bond yields are going to decline modestly in a soft landing. We have trimmed some exposure to index linked bonds but kept a small overweight in government bond as a hedge against economic downside. We have a negative view on corporate credit given extremely tight spreads, asymmetric risks with no room for error. Delighted to speak with Bloomberg thus morning to share our latest thoughts. RBC Brewin Dolphin #markets #economy #economicupdate #federalreserve #monetarypolicy #interestrates #semiconductors #assetallocation

As we reach the midpoint of 2024, the economy grapples with familiar question that has persisted over the past couple of years. When will the substantial increase in interest rates significantly impact economic conditions? The famous “long and variable lag” associated with monetary policy appears to be slowing down the pace of growth. While stock markets continue to exude optimism, the fixed income landscape is adopting a more cautious stance. https://lnkd.in/g7yuPNNM

2024 will see the third and final act of the inflation shock story that has driven asset returns over the last three years, spelling positive news for investors and consumers alike, according to the Banca Mediolanum Irish Funds’ (MIFL’s) latest Global Market Outlook published today. #Inflation

🌞 Markets in Wonderland… when fearless behaviour push limits ever further Sky is the limit… or it seems to be the mantra adopted this year by debt investors that push ever further boundaries in terms of risk positions. From corporate to sovereign, from Europe to USA through China, South America and Africa, low-rated #credit (ie. also so called high yield or junk debt) is by far the flying star of market this year. The faltering sentiment among global investors toward #default risk mostly driven by 1) the deceleration of inflation, 2) hopes that a start of a global monetary shift toward lower interest rates, without forgetting 3) a supportive fiscal policy in which public spending substitute to private investment as growth engine fuels a (very) high appetite for risk taking. Against that backdrop, the most performing credit segment turn out also the most rewarding in term of yield received but also the riskiest one like B or CCC-rated debt (corp. & sovereign included). Clearsighted or simply complacent, blindly optimistic or smartly opportunist, there are several interpretation of current market behavior according to if we buy the current mainstream scenario about a soft-landing of global economy, no reboot of inflation, no escalation of regional conflicts into international war and last but not least lower interest rates should offer some relief to both indebted government and corporates strapped by higher funding costs and weak or no growth. On this last point, it is denying the fact that the last two decades growth and investment model were broadly based on cheap credit and we are not supposed to have such loosening conditions soon (let’s cross our fingers because it would imply no major economic downturn). We can argue that current financial condition looks like a wobbling house of cards, so far all holds in place and it is difficult to identify triggers that could break ongoing market confidence that seems bullet-proof to all sort of stress (geopolitical tensions, real estate concerns, maturity wall…). How long time yet ? Could be weeks or months depending how long time investors will judge too much exposure to risky assets is risky. Note : this analysis is my personal view and is not an investment recommendation. Link : Default Risk Fades in Emerging Markets as Riskiest Bonds Soar https://lnkd.in/e79y3U2J

Here are the highlights of monthly Macro Update and Debt Market Wrap Up for the month of February 2024. Read the full report here: https://bit.ly/3wAsglU. #AbslmfUpdates #DebtMarket #MacroUpdate