Sharing our convictions

Earnings season is now in full swing, and it has undoubtedly been eventful. During the first quarter, companies have had to navigate multiple obstacles, including surging commodity prices, hawkish central bank policies, a Russian invasion, further supply chain disruptions caused by lockdowns in China, and dwindling consumer confidence.

Bear markets do not send advance warnings. But investors can pay attention to red flags. Valuation multiples are well above the long-term average and consensus estimates are bullish on earnings growth. The good news is that investors can prepare for macro uncertainty and minimize capital loss.

Collateralised Loan Obligations, or CLOs, are bond instruments issued to fund a specific pool of loans, typically senior secured or ‘leveraged’ loans, to companies. The bonds are split into tranches that can carry different ratings (and yields) according to how senior they are in the CLO’s capital structure, normally from AAA notes at the top to equity notes at the bottom.

Since the end of last year, central bank officials have been falling over themselves to increase their hawkishness around rates, particularly in the US. Even the ECB Governing Council members have been vocal of late.

Collateralised Loan Obligations, or CLOs, are bond instruments issued to fund a specific pool of loans, typically senior secured or ‘leveraged’ loans, to companies.

CRE ABS offers conservatively structured debt features, with generally short duration exposure and a spread premium rewarding the more intensive underwriting and due diligence required.

TwentyFour Portfolio Manager, Elena Rinaldi, explains how European ABS markets behaved in Q1 2022 and provides her outlook for the year ahead.

TwentyFour Partner and Portfolio Manager, Eoin Walsh, discusses market conditions in Q1 2022 and provides his outlook for the year ahead.

TwentyFour Partner and Portfolio Manager, Gordon Shannon, describes the developments of the short term bond strategy in Q1 2022.

So far, most fixed income asset classes have experienced a tumultuous 2022. With high yield markets bucking the trend in recent weeks, George Curtis takes a closer look at the drivers of the sector’s recent strength and its current opportunity set.

As pressure has been building on Chinese technology stocks given growing regulatory threats, some of the key players in the Chinese internet sector are shifting to a more prudent strategy, pulling back to focus closer on the core business rather than investing in new growth areas.

Despite the ECB's recent review bringing some previously debated points surrounding AT1s to the forefront, we believe any changes would create undesired, real-world consequences if implemented.

With inflation running at 40-year highs in many parts of the world, it is easy to get carried away with making comparisons to the dark economic days of the early 1980s. 

Can iPhone growth keep up after a super cycle? What will be Apple’s next major new product? With a mixed track record of launching new services, regulatory risks to the current App Store model, and a valuation that is not compelling, investors should be concerned around Apple’s future growth.

Last week Oodle Financial Services successfully priced its fifth UK Auto ABS transaction, Dowson 2022-1.

As this remarkable cycle rapidly progresses, thoughts have more recently turned to the chances of a US recession in 2023, and whether the Fed can somehow pull off a soft landing.

Given the twin pressures of inflation and volatility, we believe the inherent strengths of short term bonds can give investors some comfort through this uncertain phase of the cycle.

The reshaping of Deutsche Bank since the end of the global financial crisis has been one of the longest-running transformation stories in the banking sector.

Growth in 2022 is likely to be above historical averages for most developed economies, even after adjusting forecasts for the impact of the Russian invasion.

Last week both the Fed and the BoE hiked rates by 0.25%, and judging by the Fed's dot plots and comments from the Bank of England (BoE), more hikes will likely follow in the coming months.

Officially the Fed pivoted from its ‘transitory’ inflation rhetoric in December last year.

Russia’s invasion of Ukraine has triggered fresh debate about ESG considerations in fixed income, particularly when it comes to emerging markets assets.

The hawkishness of the Fed on Wednesday paved the way for the Bank of England (BoE) to follow suit.

Central banks must temper inflation at a time of geopolitical crisis, historically high valuations, slowing economic growth, declining equity markets, and a flattening yield curve – clearly not an environment for the faint of heart. Quality growth stocks, relative winners during times of persistent inflation, can be a portfolio stabilizer in challenging times.