Brazil prepares to pass judgement on Dilma’s economic record

With the first round of Brazilian general election this weekend, President Dilma Rousseff looks in real danger of losing out. With a dubious economic record since she assumed power on 1 January 2011, Dilma has been criticised for interventionist policies which, while beneficial to vast swathes of the population in the short term, have hamstrung the economy in the long term. She, by contrast, has blamed the negative effects of crises abroad and a faltering global economy.

The electorate goes to the polls on 5 October. If no candidate gains more than 50% of the vote, a second round run-off will be held on 26 October.

Once the election question has been settled would you be more or less inclined to invest in Brazil? Join the debate and let us know your thoughts using the comment button below.

With the first round of Brazilian general election this weekend, President Dilma Rousseff looks in real danger of losing out. With a dubious economic record since she assumed power on 1 January 2011, Dilma has been criticised for interventionist policies which, while beneficial to vast swathes of the population in the short term, have hamstrung the economy in the long term. … read more

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The week that was…

In the week ending 18th September, what stole the financial headlines?

The Middle East and the battle against the Islamic State of Iraq and the Levant, also known as Isis, remained firmly in the spotlight as the West upped the ante with further air strikes and attempts to bolster regional support. Indeed, the French president, François Hollande reported that French military aircraft had carried out air strikes in Iraq – its first for 15 years. Meanwhile, the US House of Representatives approved President Barack Obama’s plans to train and arm moderate Syrian rebels. The US$500m funding proposal is aimed at squeezing Isis forces in Syria. However, question remain over whether the US is prepared to send ground troops to the region. While Obama has ruled this out, the US army chief of staff, General Ray Odierno was quoted last week as saying air strikes alone will not be enough to destroy Isis.

Headline Hotlist & World/ Asset Returns Source: The BNY Mellon Investment Strategy and Solutions Group (“ISSG”) as at 19/09/14. ISSG is part of The Bank of New York Mellon.

The Middle East and the battle against the Islamic State of Iraq and the Levant, also known as Isis, remained firmly in the spotlight as the West upped the ante with further air strikes and attempts to bolster regional support. Indeed, the French president, François Hollande reported that French military aircraft had carried out air strikes in Iraq – its … read more

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Are markets set for a dose of reality?

Live Charts from MarketEye

Almost six years on from the US Federal Reserve’s first injection of QE, the landscape created by loose global monetary policy remains somewhat distorted. Despite consistent economic disappointment, the zero interest-rate backdrop has forced investors to chase returns. Meanwhile, greater confidence in the ability of central banks to backstop markets has fed risk appetites.

With this backdrop of lower growth and increased volatility likely to remain in place for some time to come, Newton’s Global Higher Income team continues to believe it is appropriate to invest in those companies whose business models are durable, self-financing and structurally driven in order to weather the risks that still persist. A good yield and growing income is likely to remain an important driver of investor’s total returns.

Newton Global Higher Income team

Almost six years on from the US Federal Reserve’s first injection of QE, the landscape created by loose global monetary policy remains somewhat distorted. Despite consistent economic disappointment, the zero interest-rate backdrop has forced investors to chase returns. Meanwhile, greater confidence in the ability of central banks to backstop markets has fed risk appetites. With this backdrop of lower growth and … read more

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The week that was…

In the week ending 11th September, what stole the financial headlines?

With the conflict in Iraq and Syria showing little sign of abating, US President Barack Obama upped the ante with a prime-time televised address in which he outlined his strategy to “degrade and ultimately destroy” the Islamic of Iraq and the Levant, also known as Isis. As part of this strategy, the Obama administration moved to secure backing from various Arab leaders and European allies. Indeed, 10 Arab states, fronted by Saudi Arabia, announced they would join the fight against Isis, while Germany, France and the UK have also thrown their support behind the plans, although the full extent of the latter’s involvement remains unclear. Back at home, US lawmakers pledged broad support behind the president’s plans but fears of an open-ended conflict continue to weigh on the shoulders of the key decision makers. The White House has already requested around US$500m in funds to aid moderate Syrian rebels fighting Isis.

Headline Hotlist & World/ Asset Returns Source: The BNY Mellon Investment Strategy and Solutions Group (“ISSG”) as at 12/09/14. ISSG is part of The Bank of New York Mellon.

With the conflict in Iraq and Syria showing little sign of abating, US President Barack Obama upped the ante with a prime-time televised address in which he outlined his strategy to “degrade and ultimately destroy” the Islamic of Iraq and the Levant, also known as Isis. As part of this strategy, the Obama administration moved to secure backing from various … read more

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Acquisitions boost US companies

US continues towards durable recovery

Outlook revisions provide a telling measurement of the health and outlook for US companies. Unsurprisingly, they traditionally occur during earnings season, when companies issue their own report cards. This quarter, it’s been all A’s — acquisitions, activists, America and avoidance of taxes. First, we’ve seen a dramatic surge in acquisition activity, as companies deploy low-cost capital and cash in highly accretive deals. Second, activists are out in full force, with no company immune to their influence, and they are successfully advocating for shareholder-friendly actions like dividends and buybacks. Third, the companies with the greatest exposure to North America had the most positive outlooks, as the US moves along the path of a durable recovery. Finally, one of the biggest stories of the quarter has been the avoidance of taxes, as several US firms employed tax inversions to their advantage. All of these factors are playing a role in driving earnings and shareholder value.

Brian Ferguson, senior portfolio manager, The Boston Company

Outlook revisions provide a telling measurement of the health and outlook for US companies. Unsurprisingly, they traditionally occur during earnings season, when companies issue their own report cards. This quarter, it’s been all A’s — acquisitions, activists, America and avoidance of taxes. First, we’ve seen a dramatic surge in acquisition activity, as companies deploy low-cost capital and cash in highly … read more

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The week that was…

In the week ending 4th September, what stole the financial headlines?

Unrest for the West continued apace as troubles in Ukraine and Iraq showed little sign of abatement. With its interference the wrong side of the Ukrainian border still largely unchecked, Russia looks set to be the subject of further economic sanctions by the EU. Indeed, it is preparing to ban Russian state-owned oil companies from raising funds in European capital markets. Such action would hit some of the country’ s largest energy groups. Meanwhile, US President Barack Obama, in Europe for the Nato summit, was the subject of criticism for his failure to develop and implement a workable strategy with which to deal with Russia’s advances. To date, Obama has repeatedly stated his desire for a diplomatic solution. Elsewhere, US air strikes in Iraq continued in an attempt to blunt the Islamic State’s rapid progress through the country. Following the execution of US journalist Steven Sotloff, the second beheading in a matter of weeks, the US president told a news conference of the US’ desire to “degrade and destroy” Islamic State.

Headline Hotlist & World/ Asset Returns Source: The BNY Mellon Investment Strategy and Solutions Group (“ISSG”) as at 05/09/14. ISSG is part of The Bank of New York Mellon.

Unrest for the West continued apace as troubles in Ukraine and Iraq showed little sign of abatement. With its interference the wrong side of the Ukrainian border still largely unchecked, Russia looks set to be the subject of further economic sanctions by the EU. Indeed, it is preparing to ban Russian state-owned oil companies from raising funds in European capital … read more

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Abenomics: what’s left in the quiver?

Aggregate wage income

We believe the decline in real wages should prove temporary. If firms can charge higher prices without paying higher wages, their profits will increase. Fatter profits will encourage firms to expand their operations and tempt new rivals to enter the market. That in turn will increase hiring and, in time, bid up wages to match the higher prices. The reflection of Japan’s economy should be a prelude to higher real wages not a threat to them.
Miyuki Kashima, Head of Japanese Equity Investment, BNY Mellon Asset Management Japan

We believe the decline in real wages should prove temporary. If firms can charge higher prices without paying higher wages, their profits will increase. Fatter profits will encourage firms to expand their operations and tempt new rivals to enter the market. That in turn will increase hiring and, in time, bid up wages to match the higher prices. The reflection … read more

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The week that was…

In the week ending 28th August, what stole the financial headlines?

The gold price rose as tensions between Ukraine and Russia showed little sign of easing. The Ukrainian president, Petro Poroshenko, says Russian troops have entered the country while Nato claims more than 1,000 Russian soldiers are operating in Ukraine. The crisis, which began in Crimea in late February, seems no closer to a conclusion. Meanwhile, the situation in Iraq remain fraught with the Islamic State controlling vast swathes of the country. US air strikes continued but so too did a reluctance from the West to send in ground troops to stabilise the situation. Elsewhere, there was a collective shrug of shoulders from market commentators as the S&P 500 passed 2,000 for the first time. Despite an upward revision to second quarter growth numbers – to 4.2% from 4.0% – doubts remain over the veracity of the US economic recovery. The lack of wage inflation, in particular, remains an area of concern with less than two months before the scheduled conclusion of quantitative easing.

Headline Hotlist & World/ Asset Returns Source: The BNY Mellon Investment Strategy and Solutions Group (“ISSG”) as at 29/08/14. ISSG is part of The Bank of New York Mellon.

The gold price rose as tensions between Ukraine and Russia showed little sign of easing. The Ukrainian president, Petro Poroshenko, says Russian troops have entered the country while Nato claims more than 1,000 Russian soldiers are operating in Ukraine. The crisis, which began in Crimea in late February, seems no closer to a conclusion. Meanwhile, the situation in Iraq remain … read more

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Markets remain blinded by the light

Vix Index

While global headlines focus on continuing unrest in Iraq and worrying geopolitical developments in Syria and Ukraine, the mood among investors in global capital markets remains remarkably benign. Global market volatility remains unusually low by historic standards. In June, investors saw global stock markets reach record highs while the US Vix index – viewed by many as the key benchmark for expected US stock volatility – hit a new seven year low.

While these becalmed market conditions have offered welcome relief for some institutions – with government borrowing rates at or near historic lows – they are not good news for everybody. Low volatility can affect trading revenues, narrowing opportunities for investment banks to profit on trades. Nevertheless, the current environment appears to present a remarkably stable backdrop for wider economic recovery. A range of factors may influence volatility but in our view one central answer lies in the extraordinary financial policy stimulus adopted by various central banks – including the US Federal Reserve (Fed) – since the financial crisis. The unconventional monetary policies implemented in order to bring down interest rates faced by companies and households and spur growth have, in fact, boosted risk taking and total debt in the global economy.

Aron Pataki, Newton Real Return team

Source: Bloomberg

While global headlines focus on continuing unrest in Iraq and worrying geopolitical developments in Syria and Ukraine, the mood among investors in global capital markets remains remarkably benign.  Global market volatility remains unusually low by historic standards. In June, investors saw global stock markets reach record highs while the US Vix index – viewed by many as the key benchmark … read more

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