Sharing our convictions

Santa will hardly fill our stockings with coal, originally used for heating around Christmas. The black stuff, later a signifier of children’s naughtiness, today is a toxic item best avoided. While we need a decarb diet after the industrial era’s greasy meals, we shouldn’t be too ambitious with our New Year’s resolutions.

In the wake of Omicron, markets immediately were rattled and plunged given low liquidity. The EU announced border closures and cancelled all flights coming from Southern Africa, and travel bans have swiftly continued in various countries. So, what does this latest development mean for bond investors and what should they look out for?

Emerging markets assets have endured a lot of punishment during 2021.

Market sentiment reflects growth that will continue at past levels, yet economies and businesses globally are facing stiff headwinds – high government debt, rising inflation, and supply chain bottlenecks. As markets shrug off risks, expect volatility and a divergence in company performance in 2022.

For 2022, inflation is not a worry for Head of Corporate Credit, Mondher Bettaieb, which should result in good carry for corporate bond investors. In his outlook for the coming year, Mondher highlights why he prefers bank AT1s and European periphery bonds

Carlos de Sousa looks forward to EM high-yield and local-currency bonds performing well in 2022. China’s economic slowdown and real estate woes are a concern, but Carlos believes they will be resolved early in in the new year.

With floating rate assets likely to be high on investors’ shopping lists for 2022, Doug Charleston looks at the floating rate options across fixed income and highlights the highest yielding opportunities.

The latest plot twist of the pandemic may have spooked markets in recent days, but the underlying sentiment is still one of worrying exuberance and investors are overlooking businesses in the consumer staples, health care and discretionary sectors that are still in the process of normalizing.

Fundamentally the outlook for 2022 appears less supportive than it was 12 months ago.

Portfolio managers Nuria Jorba, Sergey Goncharov, and Head of EM Corporate Bonds Wouter van Overfelt explain how Chile is racing to reduce their fossil-fuel emissions with the goal of becoming a pioneer in renewable energy.

Level playing field does not necessarily lead to the same results, as impressively demonstrated by twin studies. This also applies to quant funds. Even though the decisions here are made by financial mathematical models, their success still depends on external human influence.

What we are currently experiencing is a disconnect between monetary policy, the economy and the markets, a disconnect that in our view will struggle to survive much longer.