/ 3 Nov 2020
US Election Day is Here. The US election outcome will probably shape the global economic scenario for the next two years. That is because the alignment of powers which will come out from the election will dictate how much fiscal stimulus will be possibly enacted in the US going forward. There is a strong case for more fiscal stimulus in developed countries. The increase in new COVID cases in Europe and the US will probably put aside long-term concerns regarding public debt sustainability. Until a vaccine is largely available, many economic sectors will continue to be negatively affected by pandemic containment measures and so will be GDP growth.
/ 19 Oct 2020
As more than 600 million people in China traveled earlier this month for the Golden Week Holiday and Chinese domestic air travel now is tracking up year-over-year, we thought it would be interesting to look at what companies could benefit when things re-open further in the US and Europe. Both the US and Europe are facing near-term spikes in case levels and concerns are that winter will bring even more cases. Hopefully testing, treatment and vaccine options could lead to life returning closer to some level of normalcy in 2021 or 2022.
/ 14 Oct 2020
Has the time for Small Cap Growth arrived? We have shown previously how both the 'secular' trend for the USD is negative (the NET National Savings rate is negative, at the lowest level in a decade, and likely to deteriorate further as US budget deficits expand further) and 'cyclical' pressures point the same way (recall how there is really only one phase in the economic cycle where the USD strengthens, that being where inflation and real growth are both declining simultaneously - policy is actively fighting that possibility). Exposure to 'USD beta' assets in this scenario (assets that benefit from USD weakness) implies increased exposure to, for example, Emerging Market Equities and the broad spectrum of Commodities.
/ 6 Oct 2020
Recent trends behind key IG drivers are quite supportive. With the start of the last quarter of 2020 it is worth looking at some key drivers, or so called ‘technicals’, for IG given our overweight views on the asset class. First, expected IG bond issuance is likely to slow dramatically in the remainder of the year as companies see less incentive to hold large amounts of precautionary cash to face an uncertain COVID outlook. This year broke IG bond issuance records with a Sep’20 YTD worth US$1.74 trillion (the March-May 2020 period saw an monthly average issuance that was over double normal levels), easily breaching the full 2017 US$1.51 trillion existing record. Amid abundant issuance, IG companies raised cash balances and reduced refinancing needs substantially.