Sharing our convictions

In TwentyFour Asset Management’s annual fixed income outlook, Eoin Walsh says that with rates now offering both yield and downside mitigation, and credit yields at near-decade highs, fixed income investors could enjoy strong returns in 2023.

Structural themes underlie opportunities in the year ahead. Our Quality Growth portfolio managers expect stock performance will be more closely tied to earnings growth, the US consumer will remain healthy, select emerging markets are poised for continued growth, and certain Chinese stocks will benefit from a reopening.

Following Chairman Powell’s speech last night, George Curtis looks at what the latest labour market data means for the Fed’s war on inflation.

Market participants are eagerly awaiting the Fed meeting in mid-December. How it chooses to tackle inflation will determine the severity of the recession, which our models – especially the Wave and the risk model – are now clearly signaling.

Following a difficult and volatile 2022, there are sound reasons to believe that EM equities could deliver a strong rebound in 2023. Along with compelling relative valuations of EM equities, we identified three key cycles that have the potential to provide a positive boost to EM equities next year.

Biodiversity loss often takes a backseat to climate change in global headlines but ignoring the preservation of natural ecosystems poses a threat to water, land, marine life, health, and can increase poverty. There is an urgent need for change. The upcoming COP 15 will address biodiversity solutions that will benefit companies, investors, and society.

With investors caught between inflation and recession, TwentyFour Asset Management’s Chris Bowie argues current valuations in short term, investment grade bonds can offer portfolios both downside protection and attractive yields.

As the cycle of market excesses comes to an end, how can investors prepare? Tilt towards a portfolio of less-cyclical companies with pricing power and don’t mistake quality companies for those with an exciting story. The good news is that human ingenuity is not limited by the macro environment.

In late 2022, financial markets are in the middle of a structural break. This may precipitate a regime change that will alter essential market risk-return features: low inflation, low volatility, and low correlations. This paper tells you why and how investment solutions must adapt to new conditions to continue delivering attractive investment outcomes.

China’s authorities have recently revealed coordinated measures to alleviate the pressure on its property sector. The government tried to help the sector in the past year but failed; however, this time could be more determined and effective.

Will the US midterm results shape the country’s foreign policy? What to expect in terms of economic blocs? Where does the EU fit into it all? As investors juggle economic and geopolitical challenges, are there underlying trends? Lord Patten joined Dr. Reto Cueni, Vontobel Chief Economist, to share his insights.

US voters have hit the polls in a vote that determines the power dynamics in US Congress. While the Democrats have retained control of the Senate, Republicans have taken control of the House of Representatives. So, what does the outcome mean?

With Egypt’s Sharm el-Sheikh being the venue of this year’s United Nations Climate Change Conference (COP), it’s worth remembering that developing economies bear most of the negative effects of emissions mainly produced in industrialized nations. Therefore, the onus is on western companies to go “net zero carbon”, but how to measure their progress? One common yardstick for investors is the carbon footprint method – or the more encompassing “potential avoided emissions” method propagated by Vontobel’s impact investing team.

The renewables industry looks set to benefit from tightening regulation in the European Union, or a recently signed US law aiming to decarbonize the US power sector. The nascent “clean energy” industry, which encompasses areas such as electric vehicles, batteries, or hydrogen produced in a sustainable manner, opens new opportunities for investors as well.

Feeding a starving person is important, we all agree on that. But from an investor’s point of view, allocating capital to companies working towards the same end is perhaps even more appropriate. But first, go find promising ones active in areas such as increasing land yields, reducing food waste, or preserving biodiversity, to name a few.

The bear market has not yet reached its end. Meanwhile, concerns are also rising that economic stagflation - an economic situation in which stagnant growth is accompanied by inflation - could develop. This view is shared not only by our proprietary business cycle model, whose contraction signals are strengthening, but also by the continuously rising credit spread, which has reached levels of past recessions this month.

As the cycle of market excesses comes to an end, how can investors prepare? Tilt towards a portfolio of less-cyclical companies with pricing power; don’t mistake quality companies for those with an exciting story; and watch out for underestimated risks, such as carbon emission liabilities.

Price action on Monday has taken the implied equity risk premium to 10.7%, the highest since 2008. Foreign investors appear to have interpreted the composition of newly appointed Standing Committee in China as offering less likelihood of a change in policy direction on the government’s dynamic zero-Covid stance. However, the announced policies were in-line with expectations and there were no negative surprises.

The 20th Party Congress of the Chinese Communist Party is likely to make Xi Jinping the most powerful leader since Mao Zedong. Sven Schubert, Senior Investment Strategist at Vontobel discusses what the congress has in store and whether it marks the beginning of a new political and economic cycle.

As part of Vontobel’s FT Moral Money Forum partnership, Christel Rendu de Lint, our deputy head of investments, weighs in on the complexities that accompany ESG in emerging markets.

Looking back to previous cycles in the high yield market, data have shown down periods have usually given way to strong returns years. While spreads are set to stay volatile until inflation starts to slow down, Portfolio Manager Stella Ma sees valuations becoming more attractive as we near the end of 2022.

TwentyFour Partner and Portfolio Manager, Douglas Charleston, explains how ABS markets have performed in Q3 2022 and provides his outlook for the rest of the year.

George Curtis looks at market conditions in the third quarter of 2022.

TwentyFour Portfolio Manager, Johnathan Owen, explains how investment grade markets have performed in Q3 2022.