Equity Outlook: The simple reflation trades – value versus growth, cyclicals versus defensives, small caps versus large caps – that had performed well following the news of positive vaccine trial results last November reversed in April (see Exhibit 1). The
At first glance, investing to achieve outcomes aligned with the Sustainable Development Goals may appear inconsistent with an optimised portfolio outcome under the modern portfolio theory. However, tailwinds or risks associated with SDG-oriented investments may not be appropriately priced in
The coordinated central bank response to the COVID-19 crisis has pushed real yields in the developed world into firmly negative territory. While this policy action prevented a prolonged recession, it has left fixed-income investors grappling with an asset class where
Market weekly: Being open to an inclusive growth approach goes hand in hand with a focus on long-term performance and contributes to a better climate for doing business and investment. As investment specialist Ramon Esteruelas and ESG research analyst Delphine
Companies focused on inclusive growth could stand to benefit in the long run. Investment specialist Ramon Esteruelas and environmental, social and governance (ESG) research analyst Delphine Riou explain why and how investors can target this theme. This theme fits in
Issuance of green bonds began more than 10 years ago in response to (institutional) investor concerns about climate change and its political and economic implications.[1] They have become a major pillar of an asset class of sustainability-linked fixed income securities that continues
China’s economy grew robustly in the first quarter of 2021, at least on the face of it. However, underlying growth momentum has slowed. This should reduce any risk of monetary tightening that investors are worried about. The real risk is
Market weekly: Green bonds have grown and matured as a fixed-income segment over the past decade. The need for climate action has spurred a raft of green projects and activities that combat climate change and other environmental challenges and seek
The MSCI World Value index is a well-known proxy for the performance of value stocks. The index relies on three value factors (earnings-forward-to-price and dividend yields) and five growth factors to allocate to stocks. The stocks in the …
Fixed Income Outlook–2Q2 The US Federal Reserve’s new average inflation targeting framework means that the central bank will not raise policy rates until realised inflation has risen sustainably to above its 2% target. That is, it does not intend to
Market weekly The outlook for US interest rates is shifting towards a normalisation of central bank policy now that the economic recovery appears to be entrenched. Ken O’Donnell, head of short duration fixed income, discusses how investors could tackle this
Low-volatility investing has become an investment style in its own right with the launch of a number of low-volatility equity funds, in particular since the global financial crisis of 2008. Such funds are invested in low-risk stocks and the managers use different risk measures to identify …
The ebb and flow of US real interest rates, inflation expectations and the future level of policy rates remain the key drivers for asset returns globally. For example, local currency emerging market debt yields have largely mirrored those of …
Valuations of clean energy stocks, as represented by the iShares Clean Energy index, (an exchange-traded fund (ETF) that we view as a proxy for the clean energy equity sector), are now up by around 16% from the lows in early March.
At 2.5% for the MSCI AC World index, the rise in global equities in March was close to February’s 2.2%. It wasn’t all smooth running, though, as the advance of equities was challenged by a rise in US bond yields on the back of a favourable economic outlook that also prompted inflation fears.
Strong economic data over the last week in the US, Europe and Asia appears to be confirming the perception among investors that a cyclical recovery is well established. As a result, valuations of risk assets have risen on the view that the pandemic will be overcome this year.
The past decade has seen the use of multi-factor investing in corporate bonds increase significantly. Easier access to corporate bond data along and a growing body of research has enabled managers to develop robust factor-based …
In 50 years of factor investing, there have been a series of love/hate phases with regard to the use of factors in selecting stocks for portfolios. At present, 2019-2020 seems likely to go down in history as a period of aversion, much like 2009-2011 and 1998-2000. These are the periods when most of the conventional factor combinations used by portfolio managers did not perform.
Over the past decade, multi-factor investing in corporate bonds has seen significant development. Easier access to better datasets along with an extensive body of research has enabled managers to move the dial significantly. Investors can now access robust factor-based strategies offering diversification benefits in corporate debt allocations.
Asian equities peaked twice in the first quarter amid optimism over the recovery in China, the prospect of improved relations between the new US administration and China, and the arrival of COVID-19 vaccines. Zhikai Chen, head of Asian equities, argues the outlook for much of the region remains positive, even after a valuation-related stumble.
Valuations of risk assets have marked a pause in the face of a number of headwinds. In our view, valuations remain underpinned by ample central bank liquidity and the prospect, in the US, of further fiscal stimulus.
Asian equities rode high early in the year amid optimism over the recovery in China, the new US administration and improved relations with China, and the advent of vaccines. The outlook for investor flows into much of the region remains positive, even after a recent valuation-related setback. Zhikai Chen, head of Asian equities, discusses the prospects for the asset class this year.
Growth, employment, consumption, renewable energy…These are all indicators that reflect the rapid rise of the ‘blue economy’ and its growing contribution to business and industry, better living standards and the development of a more responsible global economy.
There is no universal approach to identifying value stocks or measuring their performance. Using various measures of a company’s fundamental value and picking value stocks by comparing them to sector peers would have boosted investment performance over the last decade. However, this style would still have lagged as value stocks kept getting cheaper and expensive stocks dearer.
The sell-off in US Treasury bonds reversed over the last week with the 10-year bond yield dropping from its intraday high of 1.75% on 18 March. The decline was driven principally by falling real yields as inflation expectations were mostly stable. There was also a reversal in the recent outperformance of value stocks relative to growth stocks.
Eliminating carbon dioxide emissions over the coming decades will require multi-billion dollar investments, as well as a wide range of efforts to reduce energy consumption, increase efficiency, electrify and decarbonise processes, and nurture alternative fuels to economic viability.
Meeting Paris Agreement climate change targets means tackling the harder-to-decarbonise areas of the economy with technologies that don’t yet exist at scale. There is no silver bullet to tackling climate change. It’s likely the answer to getting to net-zero emissions by mid-century is to deploy everything we have, but faster. 2050 is the target date for net zero that the Intergovernmental Panel on Climate Change (IPCC) says[1] is what’s needed …
Green bonds first emerged as issuances by supranational development banks. Since then, the market has grown considerably, with greater issuer diversification across countries and sectors (see Exhibit 1). Yet, not all green bonds are created equally, and we believe in the need to discern among green bonds in our investments.
A decade ago, after undertaking comprehensive proprietary research into the characteristics of low-risk stocks, we launched our global low-volatility equity strategy. To mark the tenth anniversary, our quantitative research group reviewed the research to determine if our initial analysis still holds true. Were the least volatile stocks from each sector more …
Allocations to factor-based strategies in corporate bonds have grown, with an expanding body of research demonstrating its advantages. In contrast with traditional bond investing, which often focuses on actively managing a portfolio’s sensitivity to changes in interest rates (duration), credit risk and currency exposure, factor investing involves picking …
Applying factors to corporate bond investing can help build a more resilient portfolio, particularly when markets face rising interest rates and heightened volatility. Olivier Laplenie and Charles Cresteil explain.
Bad news on the health front; volatile economic data; hopes that the US national 4th of July holiday can be celebrated with a BBQ; and further lockdowns, in place or imminent, in Europe. This odd concoction on the anniversary of the Great Lockdown did not keep …
Are whales man’s greatest ally as rising temperatures pose unprecedented threats to the planet? Trees are often championed in the fight against global warming: Photosynthesis captures significant quantities of carbon dioxide (CO2). However, the carbon footprint …
It is part of a broad package of legislative tools designed to reorient capital towards more sustainable businesses. The main objective is to ensure that financial market participants are able to finance growth in a sustainable manner over the long term, while combating so-called greenwashing in which the positive environmental …
Bond investors face a tougher environment: (expected) growth is pushing interest rates up from record lows, foreshadowing the eventual end of the ‘lower-for-longer’ era. The answer? Adopt an active approach with neither a strategic exposure to interest rate risk, nor the constraints of a benchmark.
Distinguishing between short and long-term issues Weekly investment update Keeping a weekly column like this one going brings home the sense of immediacy that frequently grips financial markets and that can fuel short-term spikes or dips as we have seen
Global equities rose over February as a whole, but this masked recent investor concerns. Leading indices touched new highs by mid-February, but by the end of the month, markets had seen a nervous sell-off in the wake of rising US bond yields.
China has abandoned its ‘growth at all cost’ push and is sticking with its deleveraging and structural reform policy despite the trade war with the US and COVID-19 shocks. This has resulted in a constrained growth environment.
There is no silver bullet to tackling climate change. It’s likely the answer to getting to net-zero emissions by mid-century is to deploy everything we have, but faster. 2050 is the target date for net zero that the Intergovernmental Panel on Climate Change (IPCC) says[1] is what’s needed to keep global temperature rises to below …
US real yields surged towards the end of February, spurring unpleasant memories of the ‘taper tantrum’ in 2013 when comments by Ben Bernanke, then Chair of the Federal Reserve, set off a 100bp rise in 10-year Treasury yields over several months. Now, as then, market expectations …
Multi-asset teams in the asset management industry manage not only many active benchmarked funds but also customized mandates for hundreds or even thousands of institutional investors. Moreover, the arrival of Fintech in the asset manager industry with the development …
In many ways, 2020 was a turning point. One key area within environmental, social and governance (ESG) investing was putting a spotlight on corporate behaviour and what constitutes business resilience.
Investors might wonder when to enter investment strategies related to energy transition given the stellar performance of the segment. We believe the outlook for this segment is incredibly constructive over the medium to longer term, but there will be bumps and sell-offs on the way.
Investors can still find value in the European high-yield bond market even after a more than volatile 2020 in which risk premiums fell. While the starting yield may now look much less attractive, high-yield bonds continue to …
Investing in private debt and real assets can offer investors benefits such as attractive risk-adjusted return potential and real diversification, setting these ‘alternative’ markets apart from their traditional public counterparts.
BNPP AM has restructured the BNP Paribas Human Development fund, now renamed BNP Paribas Inclusive Growth, and managed using a new investment strategy focused on inclusive growth1. It aims to generate returns …
In these extraordinary times the investment potential in Chinese equities remains extraordinary. This might sound debatable given current global uncertainties, but at BNP Paribas Asset Management, we believe the long-term growth prospects of the China’s vast, diverse equity markets and a steady move towards sustainable, quality growth …
Asia’s relatively effective pandemic control in 2020 has enabled a gradual normalisation of domestic demand. Asia remains the engine of global growth …
Bitcoin is again in the news. Some advocates of the cryptocurrency suggest its price is rising because bitcoin is challenging gold’s standing as the one supra-currency, the asset to own when fiat currencies are being debased. Does bitcoin offer something unique as …
Equity investors began 2021 focused on the expected level of earnings at the end of the year rather than on the inevitable challenges in generating them. With economies globally …
