Shinzo Abe; a tragic death but a promising legacy

by Robert White, CFA

— Japanese equities should form an important part of any truly global portfolio today.

Japan has been in the headlines for the sad and shocking death of Shinzo Abe, one of the few truly visionary democratic leaders in modern times. The former Prime Minister was instrumental in transforming Japan’s economic and military ambitions, and while both remain a work in progress, he became a revered figure on the international stage. As investors, we are optimistic about the opportunity in Japanese equities; not only are they cheap, but nascent structural reforms and robust corporate profitability should provide a healthy tailwind over the coming years.

Market Snapshot

• Global equities rose 0.6% last week
• China responded to US House Speaker Nancy Pelosi’s visit to Taiwan with 3 days of military tests and drills that encircled the island
• Brent crude fell by 14.4% over the week to $94.12 a barrel
• Gold rose 1.4% to $1790.57 per ounce

Build up not out

by Richard Stutley, CFA

— Debt is a great way to ruin a good investment.

I met with one of our underlying global listed property managers last week and I thought some of the discussion points were worth repeating here. Until such time that we all live in the metaverse, what is happening with physical space remains important, with implications for investors beyond dedicated property buyers.

From a sector perspective, we discussed the supply outlook for industrial/logistics space, following Amazon’s announcement earlier this year that they plan to mothball several new warehouse projects and sublet excess space.

Market Snapshot

• Global equities rose 3.6% last week
• The Federal Reserve Systems’ fourth rate hike this year raised interest rates by 75bps to 2.5%, as forecast
• Brent crude rose 6.6% over the week to $110.01 a barrel
• Gold rose 2.2% to $1765.94 per ounce

Finding your anchor

by Stephen Nguyen, CFA

— Debt is a great way to ruin a good investment.

What a difference a few months make. After a relatively calm year in 2021, we have witnessed several asset classes posting significant losses in the first half of 2022, including equities, credit, and sovereign bonds. We have seen an increase in volatility, and traditional diversifiers like government bonds have failed to provide protection as their correlation with risky assets has risen. The increase in correlation between bonds and equities has caused major headaches for the traditional multi-asset investors.

Market Snapshot

• Global equities rose 3.6% last week
• The Federal Reserve Systems’ fourth rate hike this year raised interest rates by 75bps to 2.5%, as forecast
• Brent crude rose 6.6% over the week to $110.01 a barrel
• Gold rose 2.2% to $1765.94 per ounce

Outrunning dinosaurs with artificial intelligence

by Lorenzo La Posta, CFA

— We need to operate closer to the frontiers of where technology is going.

I am a Millennial, born in the early 90s, which makes me probably one of the last generations to have experienced life before digitalisation took over. Maybe I was too young to be afraid of the millennium bug, but as a kid, using the internet meant monopolising my home’s landline.

Digital technologies, once a premium item for few, are today embedded in all aspects of our lives and have brought significant changes and improvements to the way we live and operate.

Market Snapshot

• Global equities fell 1.3% last week
• Following his visit to Saudi Arabia, US President Joe Biden announced Saudi Arabia was ‘committed to support global oil market balancing’
• Brent crude fell 5.5% over the week to $101.16 a barrel
• Gold fell 2.0% to $1708.17 per ounce.

Inflation Licked Bonds

by Alex Harvey, CFA

— When it comes to inflation though, postage costs are probably not front and centre of people’s minds.

Before the 4th of April this year, it cost 85 pence to send a letter first class in the UK. After that date you have needed to stick another 10 pence stamp onto your letter to maintain its first-class status. But if you had a ‘1st’ class stamp knocking about in a drawer, it effectively increased in value by an inflation busting 11.7% this year (and 11.8% the year before that).

When it comes to inflation though, postage costs are probably not front and centre of people’s minds.

Market Snapshot

• Global equities returned 1.7% last week
• Slightly improving labour and production data saw most equity markets rise
• Brent crude fell by 6.3% to $104.7 a barrel
• Gold fell by 3.8% to $1742.7 per ounce.

Buy Now, Paid Lots

by Matt Connor

— High-yielding and undervalued companies may provide investors with attractive returns.

Over recent years, the acronym ‘BNPL’ has dominated headlines due to the stratospheric rise of companies such as Klarna and Clearpay offering consumers a modern spin on a type of credit that was made popular in the twentieth century, instalment plans. Headlines associated with Buy Now, Pay Later have overwhelmingly been negative as regulators look to crack down on loose lending amid the cost-of-living crisis.

In this week’s Global Matters Weekly we focus on ‘BNPL’ stocks; high dividend-yielding companies within our UK Equity portfolio that you can Buy Now, (and be) Paid Lots.

Market Snapshot

• Global equities fell 2.2% last week
• G7 ministers have reportedly agreed to explore imposing a cap on Russian gas and oil exports in the hope that it will help cushion the impact of higher energy prices on western economies
• Brent crude fell 1.3% over the week to $111.6 a barrel
• Gold fell 0.8% to $1811.4 per ounce.

Inflationary pressures

by Jackson Franks

With the construction industry under significant pressure, current asset owners may be the beneficiaries. Due to the ever-rising costs in developing a new asset, the new supply coming to the market is minimal. Berkley Group, one of the UK’s largest home builders, recently announced that the number of new homes being built in London could halve in the coming years because of these rising costs. With a lack of new supply entering the market, competition for existing space may intensify, enabling landlords to take advantage as supply and demand dynamics shift across sub-sectors.

Market Snapshot

• Global equities fell 2.0% last week
• The World Bank became the latest body to downgrade their global growth forecast and openly warned about the risk of stagflation, now projecting a 2.9% rise in GDP for 2022 compared to a 4.1% estimate in January
• Brent crude rose 2.8% to $123.1 a barrel
• Gold fell 0.1% to $1848.8 per ounce.

Striking a chord

by Mark Wright, CFA

Just over a month ago the United Kingdom (UK) reversed years of embarrassment to finish second place in the Eurovision Song Contest. Sam Ryder’s ‘Space Man’ impressed but was pipped to the post by Ukraine’s entry, ‘Stefania’ by Kalush Orchestra.

Popular opinion is that politics has a big influence on how votes are cast, and this year’s result did nothing to dispel those suspicions.

Market Snapshot

• Global equities fell by 5.9% last week
• All major world indices logged another big week of losses
• Brent crude fell by 7.3% last week to $113.1 per barrel
• Gold fell by 1.7% to $1839.4 per ounce.

Emerging outperformance?

by Tom Delic

An investor in Emerging Market (EM) equities over the last 12 years has had a torrid time. The asset class has not only suffered poor returns in both absolute terms since 2010, but also relative to Developed Market (DM) equities, with the latter being driven by the strength of the US equity market.

Market Snapshot

• Global equities fell 2.0% last week
• The World Bank became the latest body to downgrade their global growth forecast and openly warned about the risk of stagflation, now projecting a 2.9% rise in GDP for 2022 compared to a 4.1% estimate in January
• Brent crude rose 2.8% to $123.1 a barrel
• Gold fell 0.1% to $1848.8 per ounce.

A jubilant subject

by Robert White, CFA

While we generally do our best to avoid home bias here at Momentum, I propose to break that rule today in recognition of last week’s Platinum Jubilee celebrations. Whatever your views on the monarchy, no one can deny that to serve one’s country as Head of State for 70 years is truly an impressive feat. Since her ascension to the throne on February 6th 1952, Queen Elizabeth II has lived through seven recessions, met 13 US Presidents and outlasted 14 UK Prime Ministers.

Market Snapshot

• Global equities fell 0.8% last week
• Russia’s war with Ukraine passed the 100th day
• Brent crude rose 0.2% to $119.72 a barrel
• Gold returned -0.1% to $1851.19 per ounce.