Could a ridesharing revolution boost investment prospects?

While the comprehensive introduction of rideshare systems could take years to develop, we anticipate significant progress will be made by 2020 to 2021, at which stage we believe people will be far more aware of the importance of this sector. Looking ahead, people in cities are less likely to buy a car if there is a good transport service, and we are not alone in believing the world is moving toward the wider use of robo-taxis and automated vehicles.

Cities with poor public transportation might see ridesharing as a great supplement to public transport. Ridesharing makes a lot sense in cities with poor public transport, and shared mobility also holds broad appeal in global markets such as China. Many people living in cities are also realising that owning a car is a wasted resource, as it spends most of its time parked and the rest of its time contributing to traffic congestion.

In many ways ridesharing is little different to sitting next to strangers on a subway train or bus and in-car security cameras could bring an added level of reassurance to passengers. Younger generations are already embracing the ridesharing trend and, over time, I expect many more people will become comfortable with it as well.

Barry Mills – senior research analyst. The Boston Company, part of BNY Mellon Asset Management North America.

While the comprehensive introduction of rideshare systems could take years to develop, we anticipate significant progress will be made by 2020 to 2021, at which stage we believe people will be far more aware of the importance of this sector. Looking ahead, people in cities are less likely to buy a car if there is a good transport service, and … read more

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How baby boomers are changing our cities

As the baby boomer generation ages, increasingly the idyllic countryside retirement is being replaced by city-based retirement. Compelling the move back into the heart of cities is greater access to the arts, better healthcare and less reliance on the need to drive. It is this trend of re-urbanisation that is adding to swelling city populations and in turn, increasing infrastructure demands and service needs.

Cities are not physically growing in size, it is the numbers living in them that is swelling and this creates a plethora of issues and potential problems – from environmental to social.

Hospitals, rehabilitation centres and assisted living facilities will be needed to service this aging population. Unlike other sectors facing the rise of the digital age, real estate is a prerequisite. Much of the infrastructure needed for this tectonic demographic shift has yet to be built and we are on the cusp of a construction buildout across the country that will facilitate the way our aging population lives. For example, growth in the senior population will necessitate the need for a 30% increase in hospital beds by 2030.

One of the resources that will be stretched by this trend is water. There is no operational leverage in water; each individual requires two litres of water to sustain life every day. The more people push into cities the greater the amount of water we’re going to need to transmit into those cities.

Jim Lydotes – The Boston Company, part of BNY Mellon Asset Management North America.

As the baby boomer generation ages, increasingly the idyllic countryside retirement is being replaced by city-based retirement. Compelling the move back into the heart of cities is greater access to the arts, better healthcare and less reliance on the need to drive. It is this trend of re-urbanisation that is adding to swelling city populations and in turn, increasing infrastructure … read more

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MarketEye: Why Trump’s popularity is up c.5% since start of the year

Defined as an ideological movement that says citizens are being disadvantaged and mistreated by a small group of privileged elite, it is easy to see why populism has been on the rise.

In the US, real wages for middle- and low-wage earners have been stagnant for more than a decade, yet the top 5% of earners have experienced a significant increase over the same period. If you see a neighbour that is doing really well and you feel you are struggling then that is when people tend to get dissatisfied.

This period has also coincided with the post-financial crisis recession and the slowest recovery from a recession in close to 100 years. Populism was seen as one of the key drivers behind the election of President Donald Trump in November 2016, but it is not solely the US that has seen it rise. Changes in the type of manifesto individuals are elected on can bring changes in policy, which in turn has an impact on stock markets.

Now we have a ‘populist’ president and he has different policies and methods of communicating with the electorate. He is seen as controversial, but despite his style and approach, he has been successful in terms of getting some of his key policies enacted. Apart from Obamacare reform, he has succeeded in lowering the corporate tax rate, allowing US companies to repatriate earnings at a low tax rate, and commencing regulatory reform.

We view the majority of his headline policies as pro-growth and pro-business and therefore see opportunities in the US equity market.

Chuck Cook – portfolio strategist. BNY Mellon Asset Management North America 

Defined as an ideological movement that says citizens are being disadvantaged and mistreated by a small group of privileged elite, it is easy to see why populism has been on the rise. In the US, real wages for middle- and low-wage earners have been stagnant for more than a decade, yet the top 5% of earners have experienced a significant … read more

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The risk business: towards a new paradigm?

Geopolitical analysis is an essential piece of investment management that many firms currently neglect. We think markets are not fairly pricing the level of current and potential global geopolitical risk due to distortions such as central bank liquidity. Another explanation for the recent complacency toward geopolitical risk is the rise of exchange-traded funds (ETFs), which has distorted capital flows into equities. However, recent price action of political risk-off assets including gold, the Swiss franc, the Japanese yen and the “Defence” Index (Dow Jones US Select Aerospace & Defence Index) is becoming more acute in response to the most recent geopolitical events. In short, geopolitical risk is starting to get noticed, and we believe active equity asset managers are well positioned to capture the benefits and avoid the pitfalls.

Jim Lydotes – portfolio manager and Richard Bullock – senior analyst. BNY Mellon Asset Management North America

Geopolitical analysis is an essential piece of investment management that many firms currently neglect. We think markets are not fairly pricing the level of current and potential global geopolitical risk due to distortions such as central bank liquidity. Another explanation for the recent complacency toward geopolitical risk is the rise of exchange-traded funds (ETFs), which has distorted capital flows into … read more

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Flying high: the rise of the drones

Until recently, drones or unmanned aerial vehicles (UAVs) were most commonly recognised for their military application and, in small scale, as children’s toys. Now, via new technologies, they have uses in areas such as farming, industrial inspection, mapping and search and rescue. Commercial drones are fast becoming big business.

Many drones now carry infrared sensors, which allow them to “see” heat at great distances. For search and rescue and first responders, the technology could make rescue efforts faster and more efficient. UAVs can also cross sector verticals and have applications throughout nearly every industry, aided in part by new sensors like infrared. Energy companies can use them to inspect pipelines and solar farms to prevent leaks and boost efficiencies and transportation and infrastructure companies can test ageing infrastructure to improve safety. Agricultural and mining applications can boost yields and lower costs with improved mapping techniques.

The increasing sophistication and application of drones presents exciting potential to both businesses and tech-savvy investors. Autonomous drones, capable of operating independently, are also in development and could be a reality in the next three to five years. UAVs offer the potential to boost productivity via higher efficiency and resource utilisation as well as lower costs. UAVs may reduce environmental accidents by identifying looming risks. The sky really may be the only limit.

Robert Zeuthen – senior equity analyst, BNY Mellon Asset Management North America.

Until recently, drones or unmanned aerial vehicles (UAVs) were most commonly recognised for their military application and, in small scale, as children’s toys. Now, via new technologies, they have uses in areas such as farming, industrial inspection, mapping and search and rescue. Commercial drones are fast becoming big business. Many drones now carry infrared sensors, which allow them to “see” … read more

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Out with the old: shocking stats on the need for a US infrastructure boost

The devastating impact of the 2017 US hurricane season raised timely questions about US national infrastructure in the face of an increasingly uncertain climate. Hurricane damage in southern states, such as Florida and Texas, shone a spotlight on the resilience of key utilities, such as power grids, and highlighted the need to improve safety after decades of under investment in transportation, public buildings, water treatment systems and other forms of vital infrastructure.

Infrastructure renewal was a cornerstone of President Donald Trump’s election campaign but also has almost universal support politically, and we believe much can be achieved. We are particularly positive about the potential to develop new energy infrastructure thanks to the growth in shale energy extraction. The sector faced significant financial pressures from 2014 to 2015 but we think oil and gas pipeline companies can now regroup and drive ahead with major new projects.

Brock Campbell – portfolio manager. The Boston Company Asset Management, a BNY Mellon company

The devastating impact of the 2017 US hurricane season raised timely questions about US national infrastructure in the face of an increasingly uncertain climate. Hurricane damage in southern states, such as Florida and Texas, shone a spotlight on the resilience of key utilities, such as power grids, and highlighted the need to improve safety after decades of under investment in … read more

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Steel in the ground: making the case for US infrastructure renewal

US infrastructure is overdue for upgrade. Chronic underspending on roads, bridges, water, energy and senior housing has resulted in an infrastructure unable to withstand the strain of a growing, mobile and ageing population. For the first time in decades, cyclical, secular and structural trends are aligning, which we believe will usher in a period of investment not seen since the Eisenhower administration. We forecast over US$1 trillion in projects that could be built over the next 10 years. In our view, President Trump’s forthcoming infrastructure plan and emphasis on deregulation, combined with the readily apparent economic need, provide the near-term catalysts necessary to open the floodgates.

Brock A. Campbell, James A. Lydotes, William J. Adams – The Boston Company Asset Management, a BNY Mellon company

US infrastructure is overdue for upgrade. Chronic underspending on roads, bridges, water, energy and senior housing has resulted in an infrastructure unable to withstand the strain of a growing, mobile and ageing population. For the first time in decades, cyclical, secular and structural trends are aligning, which we believe will usher in a period of investment not seen since the … read more

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A parting of ways for the US and Europe?

An uptick in Eurozone economic data as well as relative political stability are among the factors most likely to drive a wedge between the performance of the US and European economic blocs in coming months. Recent PMI readings in Europe were far better than expected, with some modest semblance of inflation coming back into the system. The ECB acknowledged as much when at the end of June its President Mario Draghi said the European economy is on the cusp of transitioning from deflation toward reflation.

Meanwhile, other lead indicators in Europe, including GDP growth and earnings revisions, continue to improve driven by cyclical sectors. Despite the recent pullback in oil and commodity prices, cyclical sectors like consumer discretionary and materials have seen strong year-over-year earnings trends as underlying commodity prices remain higher than 12-18 months ago.

Mark Bogar – The Boston Company, a BNY Mellon company

An uptick in Eurozone economic data as well as relative political stability are among the factors most likely to drive a wedge between the performance of the US and European economic blocs in coming months. Recent PMI readings in Europe were far better than expected, with some modest semblance of inflation coming back into the system. The ECB acknowledged as … read more

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US banks ‘ace’ Fed stress tests

In our view, this year’s CCAR[1] process – which all 34 systemically important US banks passed – points the way to a brighter future for the financial services sector.

The results support our belief that the market has been under-appreciating the magnitude of capital return both this year and importantly next year when the new administration chooses their pro-business appointees at the Federal Reserve.

As long-term relative price-to-book ratios in the sector suggest, a whole group of undervalued companies in the sector have good prospects even if only part of the reform package of President Donald Trump gets through.

John Bailer – The Boston Company, a BNY Mellon company

[1] The Comprehensive Capital Analysis and Review (CCAR) is an annual exercise by the Federal Reserve to assess whether the largest bank holding companies operating in the United States have sufficient capital to continue operations throughout times of economic and financial stress

In our view, this year’s CCAR[1] process – which all 34 systemically important US banks passed – points the way to a brighter future for the financial services sector. The results support our belief that the market has been under-appreciating the magnitude of capital return both this year and importantly next year when the new administration chooses their pro-business appointees … read more

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AI and a brave new world of investing

The development of AI—computer systems that can think intelligently and learn as humans do—continues to generate global excitement and controversy, while dividing public opinion. Some fear the development of intelligent machines poses a greater threat to humanity than climate change and could even presage the end of the world. Others remain optimistic AI can bring huge benefits to humankind, including the scope to boost productivity, revolutionise the workplace and unleash a new wave of global economic growth.

We have identified an AI investment universe of about US$13.5 trillion, including 750 stocks, mainly comprised of US companies. We point to the potential for increased AI application in areas, such as retail, transportation, healthcare, manufacturing and agriculture. The development and adoption of so-called natural language processing and its inclusion in everyday items such as smartphones will likely drive future market growth.

We are going to places we haven’t gone before, and in doing so, there are some unanswered questions that may come into play on ethical dimensions and how much free will AI embodies in machines and what this is used for. These are topics that will come up more and more as AI becomes a part of our daily lives. The hope is we can exploit the potential benefits of AI and harness them for humankind in a way that fosters not only greater prosperity but also helps us to enjoy a better quality of life

Robert J. Kluchko – The Boston company, a BNY Mellon company

The development of AI—computer systems that can think intelligently and learn as humans do—continues to generate global excitement and controversy, while dividing public opinion. Some fear the development of intelligent machines poses a greater threat to humanity than climate change and could even presage the end of the world. Others remain optimistic AI can bring huge benefits to humankind, including … read more

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