US bonds in turmoil - what’s really at play?
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The U.S. bond market is facing volatility with a 60-basis-point increase in 10-year Treasury yields since the FOMC meeting on September 18, 2024; driven by strong macroeconomic data, commodity price inflation from Chinese stimulus, and Fed officials advocating a higher terminal rate; political uncertainties, particularly a potential Republican sweep in the upcoming elections, are adding pressure; the terminal rate has been revalued from 2.7% to 3.4%, with Atlanta Fed President Raphael Bostic estimating a neutral rate of 3.0–3.5%; breakeven rates rose from 2.05% to 2.32%, nearing 2024 highs; the term premium has turned positive, rising by 50 basis points; the MOVE index for bond market volatility reached a one-year high on October 7; if the Fed cuts rates by 50 basis points by the end of 2024, a yield curve steepening of about 70 basis points is expected; a Trump presidency could lead to aggressive fiscal expansion, increasing inflation risks and limiting deep rate cuts; potential stabilizing factors include a divided government or weaker macroeconomic data; the bond market remains steady but fragile, with caution advised on long-term rates.

#UsBonds #TreasuryYields #FederalReserve #InterestRates #PoliticalUncertainty #Inflation #FiscalPolicy #MarketVolatility #Elections #EconomicData

https://ifamagazine.com/us-bonds-in-turmoil-whats-really-at-play/ 

 Thinking of repositioning your portfolio pre-US election? Think again warns Morningstar Indexes' Dan Lefkovitz
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Dan Lefkovitz, Indexes Strategist at Morningstar Indexes, advises against repositioning portfolios ahead of the November 5, 2024 US Presidential election; the best performing US equity sector since January 2021 has been energy, despite significant spending on solar and wind; historical context shows that stock performance is driven more by earnings and cash flows than by political changes; markets have thrived and crashed under various administrations; investors should prepare for a range of scenarios and maintain diversification; emotional biases can lead to poor investment decisions.

#Investing #UsElections #PortfolioManagement #MarketPerformance #EnergySector #Diversification #Politics #FinancialMarkets #Morningstar #DanLefkovitz

https://ifamagazine.com/guest-insight-thinking-of-repositioning-your-portfolio-pre-us-election-think-again-warns-morningstar-indexes-dan-lefkovitz/ 

 Investor Confidence falls 11% as Budget jitters dominate
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HL’s Investor Confidence Index fell 10 points to 75, a decrease of 11.2%; Confidence in UK economic growth dropped by almost 20%; Investors are concerned about rising capital gains tax (CGT) bills and potential pension reforms ahead of the UK Budget due on October 30, 2024; Japan was the only region with increased confidence, rising 7.2%; Confidence in UK economic growth fell by 14 points (19.8%) from September; Investors are more likely to buy passive funds; The Investor Confidence Index is based on a survey of 6,000 clients, with a 10% response rate.

#InvestorConfidence #UkBudget #CapitalGainsTax #PensionReforms #Japan #PassiveFunds #EconomicGrowth #HlIndex #MarketTrends #Finance

https://ifamagazine.com/investor-confidence-falls-11-as-budget-jitters-dominate/ 

 Invesco: Early earnings calls indicate a resilient US economy
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Kristina Hooper, Chief Global Market Strategist at Invesco, notes positive trends in early Q3 earnings calls, with 6% of S&P 500 companies reporting. S&P 500 earnings growth is expected at 4.1%, with technology at 14.9% and materials/energy sectors negative. Historically, 37 of the last 40 quarters saw actual earnings growth exceed estimates. The US economy is in good shape, likely experiencing a soft landing. Consumers are healthy but price-conscious, with higher income consumers driving spending. Labor market strength is crucial for consumer health. Corporations are optimistic, with 85% expecting increased travel spending in 2025. Risks include trade wars affecting margins. China's recent stimulus plan aims for long-term growth, supporting local governments and state-owned banks. Upcoming data releases will provide further insights into the US economy's strength.

#UsEconomy #EarningsSeason #Invesco #KristinaHooper #S&p500 #ChinaStimulus #ConsumerSpending #LaborMarket #CorporateOptimism #TradeRisks

https://ifamagazine.com/invesco-early-earnings-calls-indicate-a-resilient-us-economy/ 

 FTSE 100 cash yield bolstered by takeovers and buybacks alongside flat dividend forecasts
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AJ Bell's Dividend Dashboard reports aggregate dividend forecasts for FTSE 100 in 2024 at £78.6 billion, with a 1% growth, and £83.9 billion in 2025, a 7% increase; FTSE 100 firms plan £49.9 billion in share buybacks for 2024, following £52 billion in 2023; total cash returns from FTSE 350 expected at £189.7 billion, yielding 7.7%; FTSE 100 pre-tax profits forecast at £237.3 billion for 2024, down 4% from previous estimates; 43 FTSE 100 firms have announced buybacks in 2024; concentration risk noted as top 10 companies will pay 55% of total dividends; dividend cover expected to fall to 2.07 times in 2024; M&G currently has the highest yield in FTSE 100; 137 dividend cuts in the last decade, with 10 more expected in 2024.

#Ftse100 #Dividends #Buybacks #Takeovers #MarketAnalysis #Investment #UkEconomy #FinancialForecasts #CashYield #StockMarket

https://ifamagazine.com/ftse-100-cash-yield-bolstered-by-takeovers-and-buybacks-alongside-flat-dividend-forecasts/ 

 Starting with a bang: PIMCO's Wilding and Boxer share analysis following Fed 0.5% interest rate cut
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PIMCO's Tiffany Wilding and Allison Boxer analyze the Fed's 0.5% interest rate cut on September 19, 2024; this marks the first cut since 2020; the Fed's new median projection for the policy rate by 2025 is 3.25%-3.5%, 150 bps lower than current levels; they believe the Fed will continue to cut rates in 25-bp increments; the Fed's unemployment projection for year-end 2024 is now 4.4%, up from 4.0%, while core inflation is projected at 2.6%, down from 2.8%; Governor Michelle Bowman dissented for a smaller cut, marking the first dissent since 2005; the Fed's actions suggest a shift towards a more normal economy; intermediate-maturity bonds may outperform cash during this cutting cycle.

#Pimco #FederalReserve #InterestRates #Economy #Inflation #Employment #Bonds #FinancialAnalysis #TiffanyWilding #AllisonBoxer

https://ifamagazine.com/starting-with-a-bang-pimcos-wilding-and-boxer-share-analysis-following-fed-0-5-interest-rate-cut/ 

 Hidden GEMs: Beware outdated perceptions when comparing credit markets
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Alan Siow, Co-Head of Emerging Market Corporate Debt at Ninety One, emphasizes the need to reassess outdated views on emerging market credit as of August 21, 2024; major economies like the US are grappling with persistent inflation and fiscal deficits post-pandemic; the traditional label of 'emerging markets' is becoming less relevant due to improved fundamentals and resilient sovereign debt performance; recent elections in India, South Africa, and Mexico have shown peaceful democratic processes; EM central banks are ahead in rate-cutting cycles, providing an advantage; emerging markets host many leading global companies with low leverage and strong cash reserves; the case for including EM credit in portfolios is strong, offering comparable or superior yields to developed markets.

#EmergingMarkets #CreditMarkets #Investment #FixedIncome #Economy #Inflation #Debt #Finance #GlobalEconomy #MarketTrends

https://ifamagazine.com/hidden-gems-beware-outdated-perceptions-when-comparing-credit-markets/ 

 The calm after the storm - J. Safra Sarasin - IFA Magazine
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The financial market turbulences this week have highlighted that macro risks are shifting from inflation to growth; carry trades are vulnerable to sharp reversals in late cycle environments; expectations regarding the additional earnings potential from artificial intelligence (AI) have their limits as well. Downside risks to economic growth have increased as the global manufacturing sector has slowed again. We do not expect an immediate US recession or an emergency rate cut by the Fed before the September meeting. We now forecast three Fed rate cuts by 25bp this year instead of just one. Economic data in the euro area have disappointed as well, supporting our expectations for three rate cuts by the ECB and the BoE, and one cut by the SNB in the second half of this year. We forecast bond yields to fall further over the next 6 to 12 months. We expect the yen to push higher in the FX space. On the equity side, we retain our defensive stance. Financial markets received a wake-up call as markets corrected due to concerns about an imminent US recession, the unwinding of yen carry trades, and a more negative view about the earnings potential of US equities in a global slowdown. Geopolitical tensions in the Middle East contributed to the general risk-off sentiment. Macro data have disappointed over the previous weeks, mainly concentrated in the manufacturing sector. Markets put too much weight on the weaker US labor market report. The US labor market report led some market participants to conclude that the Fed is far behind the curve and needed to lower policy rates quickly and significantly. Some market participants are moderating their expectations regarding the earnings potential of AI and some companies are reporting fading consumer demand in the US and China, yet the Q2 earnings season in the US was solid. Markets and central banks will focus less on the still elevated inflation rates and more on the labor market and deteriorating economic growth perspectives. We expect three rate cuts by the Fed and confirm our expectation for three more rate cuts by the ECB this year. We have revised our forecasts for 2024 and 2025. Euro area and Japan inflation both up to 2.5% from 2.4%, UK GDP up to 0.8% from 0.7%, GDP growth in China down to 4.8% from 5.1%. For 2025, we have lowered our inflation forecasts for the US to 2.6% from 2.7%, for Switzerland to 1.0% from 1.1%, and increased it for Japan to 2.1% from 2.0%. We also increased our 2025 growth forecast for Japan from 1.2% to 1.3%.

#Investments #LongRead

https://ifamagazine.com/the-calm-after-the-storm-j-safra-sarasin/ 

 US recession fears prompt global market sell-off | Invesco's Kristina Hooper shares her latest market analysis - IFA Magazine
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US recession fears prompt global market sell-off; Japanese stocks dropped 12.4% on Monday; European stocks fell 2.2%; US markets also tumbled; VIX volatility index briefly spiked above 60; US Federal Reserve kept interest rates steady; US economic data showed weakness; Initial jobless claims worse than expected; Manufacturing PMI for July fell to 46.8; US employment situation report for July showed lower than expected non-farm payroll gains; Bank of Japan raised key policy rate and reduced purchases of long-term Japanese Government Bonds; Bank of England cut policy rate by 25 basis points; Market sell-off due to Fed's hawkish stance, Middle East instability, tech earnings disappointment, and US election uncertainty; Positive earnings surprises in Q2; Third-quarter earnings forecasts not downwardly revised significantly; Recession indicators have not been triggered; Fed rate cuts expected in Q3; Valuations have become more attractive; Investors should stay calm and be patient; Jackson Hole conference may provide more insight into Fed's rate-cutting plans.

#UsRecession #GlobalMarketSelloff #KristinaHooper #Invesco #Fed #InterestRates #EconomicData #JoblessClaims #Pmi #EmploymentSituation #BankOfJapan #BankOfEngland #EarningsSurprises #RecessionIndicators #FedRateCuts #Valuations #JacksonHoleConference

https://ifamagazine.com/us-recession-fears-prompt-global-market-sell-off-invescos-kristina-hooper-shares-her-latest-market-analysis/ 

 Yield advantage presents investment opportunities - IFA Magazine
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The post-pandemic inflation shock and rate-hiking cycle produced a generational reset higher in bond yields, creating a compelling multiyear outlook for fixed income as inflation recedes and risks build in other markets. Richard Clarida, Andrew Balls, and Daniel J. Ivascyn of PIMCO share their latest secular outlook identifying genuine yield advantage. They highlight three areas where investors may be overlooking risks: unsustainable U.S. debt trajectory, potential economic impacts of artificial intelligence, and stretched asset valuations. They believe that fixed income offers an attractive long-term outlook as inflation recedes, and they recommend a rethinking of the traditional 60% stocks / 40% bonds asset allocation paradigm. They also see opportunities in asset-based lending and commercial real estate debt. They expect yield curves to steepen as policy rates decline and the term premium builds, and they prioritize credit selection and liquidity in the bond market. They believe that global bond markets offer attractive and diverse opportunities for enhancing yield without significantly increasing risk. They also emphasize the importance of active investment management in constructing portfolios yielding about 6%–7% without taking on significant risk. They expect fiscal pressures to cause yield curves to steepen over the coming years, and they believe that the U.S. dollar will remain the dominant global currency. They see challenges in China's outlook and Europe's fragmented politics. Overall, they recommend a renewed focus on public fixed income markets and prioritize credit selection and liquidity in the bond market.

#Investment #FixedIncome #BondYields #Inflation #AssetAllocation #AssetbasedLending #CommercialRealEstate #YieldCurves #CreditSelection #Liquidity

https://ifamagazine.com/yield-advantage-presents-investment-opportunities/ 

 AI Investment Race: Discover Which Countries Are Dominating the Future of Technology
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Recent reports suggest that AI investments are predicted to approach $200 billion globally by 2025. The United States is the country investing the most in AI, with $328,548 million spent in the last five years. China ranks second with $132,665 million spent on AI between 2019 and 2023. Singapore leads in AI investment relative to GDP, with an investment equivalent to 1.5% of its current GDP. The United States invests $12.90 per thousand $GDP, followed by Estonia with $10.89 per thousand $GDP.



https://ifamagazine.com/ai-investment-race-discover-which-countries-are-dominating-the-future-of-technology/ 

 Over a third of landlords looking to grow portfolios - IFA Magazine
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Over a third (38%) of landlords would like to expand their property portfolio in the next twelve months, according to a survey by Lendlord. The survey also revealed that 20% of landlords are looking to renovate their properties, while 42% plan to concentrate on renting out their existing properties. Landlords prioritize improving the value of their properties (45%) and increasing rental income (38%) as their investment goals. 40% of landlords intend to leverage existing equity in their portfolio, while 35% would consider taking out a new mortgage or loan. Market fluctuations (42%) and regulatory changes (38%) are the top concerns for landlords in 2024. The majority of respondents (82%) expressed a desire to continue growing and expanding their property portfolios in the future.

#Landlords #PropertyPortfolio #InvestmentGoals #RentalIncome #Mortgage #Loan #MarketFluctuations #RegulatoryChanges

https://ifamagazine.com/over-a-third-of-landlords-looking-to-grow-portfolios/ 

 State Street Global Advisors launches Article 8 emerging market debt fund - IFA Magazine
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State Street Global Advisors has launched the State Street Emerging Markets ESG Hard Currency Government Bond Index Fund, an Article 8 fund investing in US Dollar-denominated emerging market government bonds. The fund tracks the J.P.Morgan ESG EMBI Global Diversified Index and applies an ESG scoring and screening methodology. It is denominated in USD and domiciled in Luxembourg. The fund was seeded with an initial investment of approximately USD50m. State Street Global Advisors is a leader in indexed Emerging Market Debt strategies and manages over USD40bn of dedicated assets under management as of December 2023.



https://ifamagazine.com/state-street-global-advisors-launches-article-8-emerging-market-debt-fund/ 

 How do stocks, bonds and cash perform when the Fed starts cutting rates? - IFA Magazine
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In the 12-months after the US Federal Reserve (Fed) starts cutting interest rates, the average return from US stocks has been 11% ahead of inflation. Stocks have also outperformed government bonds by 6% and corporate bonds by 5%, on average. Cash has been left even further in their wake. Stocks have beaten cash by 9% in the 12 months after rates start to be cut, on average. Bonds have also been a better place to be than cash. These outcomes are the findings of new, long-term, analysis of investment returns during 22 US interest rate cutting cycles since 1928. Stock returns were better if a recession was avoided but, even if it wasn’t, they were still positive on average. Bond investors tend to do better if a recession occurs. Corporate bonds have outperformed government bonds, on average, in the more economically-rosy scenario. The range of historical returns is wide for stocks and bonds, but both have tended to do well when the Fed has started cutting rates. Unlike most historical episodes, the Fed is not considering cutting rates because it’s worried that the economy is too weak. It is doing so because inflation is going in the right direction, meaning policy does not have to be so restrictive. If it is right, and can engineer a “soft landing”, then 2024 could be a good year for stock market investors and bond investors.

#Stocks #Bonds #Cash #InterestRates #InvestmentReturns #UsFederalReserve

https://ifamagazine.com/how-do-stocks-bonds-and-cash-perform-when-the-fed-starts-cutting-rates/ 

 PIMCO's Tiffany Wilding assesses the risk of a 'no landing' scenario for the US economy - IFA Magazine
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Tiffany Wilding, Managing Director and Economist at PIMCO, assesses the risk of a 'no landing' scenario for the US economy. Recent economic data indicators suggest that a soft landing for the US economy may not be as likely as some investors believe. While the chances of a soft landing have increased, there are risks of growth stagnation or inflation reigniting. The current economic cycle shares some ingredients of a soft landing, such as a post-pandemic recovery in global supply chains and labor supply. However, productivity has stagnated in developed markets, and the risks of inflation reaccelerating and recession remain elevated. Recent macro developments, including the January payroll report, raise concerns about inflation. The US economy's growth momentum and wage inflation have not decelerated as expected. The Federal Reserve is still forecasted to begin cutting rates around midyear, but progress on inflation in 2024 may be slower than in 2023. If current macro trends don't reverse, the risk of a 'no landing' scenario may increase. Investors should stay mindful of the risks in either direction.

#Pimco #TiffanyWilding #UsEconomy #SoftLanding #Inflation #EconomicData #FederalReserve

https://ifamagazine.com/pimcos-tiffany-wilding-assesses-the-risk-of-a-no-landing-scenario-for-the-us-economy/ 

 How is SEIS used by portfolio companies to raise money? - IFA Magazine
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SEIS is designed to help portfolio companies raise money when they begin trading. It does this by offering tax reliefs to individual investors who buy new shares in the company. Start-up businesses in the UK can receive a maximum of £150,000 through SEIS investments. In September 2022, the UK Government announced improvements to the tax-efficient Seed Enterprise Investment Scheme (SEIS) scheme, which gave investors the chance to invest twice as much per year. Investors could now invest £200,000 per year, up from £100,000. One key benefit of investing through SEIS is that an investor is eligible for income tax relief in respect of shares issued to them. The investor does not need to be a UK resident but must have UK income tax liability against which to set the relief.

#Seis #PortfolioCompanies #RaisingMoney #TaxReliefs #Investors #Start-upBusinesses #UkGovernment #IncomeTaxRelief

https://ifamagazine.com/how-is-seis-used-by-portfolio-companies-to-raise-money/