Top of the Pops: What will be the market’s Christmas No.1?

Just when you thought risky assets could not go any higher or quantitative easing any better, welcome to 2017: the year of the relief rally. The year when asset returns made the TMT bubble of 2000 lore palatable if not possible. Among the cornucopia of rising risk assets, which one will end the year on top?

We might have the tried and true US Equities. A bit like Mariah Carey’s “All I Want for Christmas Is You”, this one’s an easy crowd pleaser. While maintaining historically high margins of nearly 10%, US S&P 500 earnings have grown 10.4% through Q3 2017[1] and are expected to grow slightly higher in 2018 with the majority of earnings growth coming from the IT sector.

Or alternatively, the Christmas number one could go to an asset class coming in from the shadows, like EM equities: a bit like the comeback of Wham’s “Last Christmas”, one of this year’s favourites in homage to George Michael. The last calendar year MSCI EM equities topped the asset class charts was 2009.

Normally the winner of X Factor does well on the Christmas list. This year’s contender is Rak-Su and give it to me or “Demelo”. The market wanted inflation and a strong USD in 2017 but got neither of them in spades. Not surprisingly, with negative real rates, cash is a strong contender for worst asset class of 2017. Holding onto cash in most major currencies would have lost you money in real terms. The Zero Lower Bound (ZLB) turned out to not be a lower bound after all with negative short-term nominal rates in Japan, Europe, Sweden, Switzerland and Denmark during 2017.

The odds on favourite for this year’s Christmas number one is Ed Sheeran’s remix with Beyoncé of “Perfect”. And our Christmas chart wouldn’t be complete without the perfect asset class stocking stuffer, the bitcoin. According to COINBT:SS the lead crypto currency is up 1,575% year-to-date.

Stormzy’s “Blinded by Your Grace” might apply to the impact of currency if you valued your assets in US dollar rather than sterling in 2017.  Based on the negative sentiment in the options market, the historic trade deficit and/or stubborn fiscal deficit the GBP lost nearly 10% against the USD. Despite a formal end to QE and the first serious Federal Reserve rate rises since 2006, the USD surprised the market and lost nearly 10% of its value over the year. [2] So to hedge or not currency hedge became a serious question again for investors.

Jason Lejonvarn – Investment strategist, Mellon Capital

[1] Bloomberg, as at 30 September 2017

[2] Bloomberg YTD as at 13 December

Just when you thought risky assets could not go any higher or quantitative easing any better, welcome to 2017: the year of the relief rally. The year when asset returns made the TMT bubble of 2000 lore palatable if not possible. Among the cornucopia of rising risk assets, which one will end the year on top? We might have the … read more

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2015: which asset class performed best?

Last year proved to be a roller coaster of surprises for many investors, even though the US Federal Reserve did (eventually) manage policy ‘lift-off’ as was widely anticipated 12 months ago.  However, the ongoing rout in commodities, led by a 30%+ decline in energy prices, continued to drag on markets, particularly those with greater commodity exposure.  As a result, headline index movements across the globe disguised divergent trends below the surface, as a narrowing range of countries, sectors and stocks continued to defy the softening market tone.

Somewhat remarkably, despite the persistence of poor media headlines, the Chinese A-Share index managed a 9.3% gain in local currency terms (versus 4.6% in US dollar terms) as government intervention, and a ban on sales of large holdings, calmed investors nerves after the ‘botched’ currency devaluation in August.  A key issue for 2016 is likely to be whether the Fed manages to engineer the gradual ascent of interest rates anticipated or, like Buzz Lightyear in Toy Story, instead of flying on the path to ‘normalisation’, the Fed gets found out to be ‘falling with style’.

Peter Hensman – Newton, a BNY Mellon company

Last year proved to be a roller coaster of surprises for many investors, even though the US Federal Reserve did (eventually) manage policy ‘lift-off’ as was widely anticipated 12 months ago.  However, the ongoing rout in commodities, led by a 30%+ decline in energy prices, continued to drag on markets, particularly those with greater commodity exposure.  As a result, headline … read more

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The week that was…

In the week ending 2nd October, what stole the financial headlines?

The battle between the West and Islamic State militants intensified. Backed by a number of Middle Eastern states, the US-led air campaign gained additional backing as both the Australian and Canadian governments pledged military support. Canada’s government has promised CF-18 fighter jets and refuelling and surveillance aircraft. Meanwhile, the anti-Islamic State movement gained further traction as Turkey, thus far reluctant to take a frontline role against the militants, signalled it may send troops into Syria or Iraq and let allies use its air bases. Elsewhere, positive US jobs data raised the possibility of an early interest rate hike by the US Federal Reserve. September’s job report showed the unemployment rate had fallen to 5.9%, its lowest level since August 2008.

Headline Hotlist & World/ Asset Returns Source: The BNY Mellon Investment Strategy and Solutions Group (“ISSG”) as at 03/10/14. ISSG is part of The Bank of New York Mellon.

The battle between the West and Islamic State militants intensified. Backed by a number of Middle Eastern states, the US-led air campaign gained additional backing as both the Australian and Canadian governments pledged military support. Canada’s government has promised CF-18 fighter jets and refuelling and surveillance aircraft. Meanwhile, the anti-Islamic State movement gained further traction as Turkey, thus far reluctant … 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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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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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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The week that was…

In the week ending 12th June, what stole the financial headlines

With relations between Ukraine and Russia already at breaking point, Ukraine’s prime minister ordered his government to prepare for a possible cut-off in natural gas supplies from Russia. This followed failed negotiations with Russian state-controlled Gazprom. Ukraine owes close to US$2bn in unpaid gas bills to Gazprom and the Russian giant has suggested it will demand pre-payment in the future. Meanwhile, three weeks after the US Justice Department accused China of hacking operation aimed at advancing its satellite and aerospace programmes, a private US report accused another Chinese military unit of similar infringements. Elsewhere, talk on Capitol Hill returned to US fiscal policy. In a speech in New York, US Treasury Secretary Jack Lew said US fiscal policy was now under control as he set out ambitious reform.

Headline Hotlist & World/ Asset Returns Source: The BNY Mellon Investment Strategy and Solutions Group (“ISSG”) as at 13/06/14. ISSG is part of The Bank of New York Mellon.

With relations between Ukraine and Russia already at breaking point, Ukraine’s prime minister ordered his government to prepare for a possible cut-off in natural gas supplies from Russia. This followed failed negotiations with Russian state-controlled Gazprom. Ukraine owes close to US$2bn in unpaid gas bills to Gazprom and the Russian giant has suggested it will demand pre-payment in the future. … read more

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The week that was…

In the week ending 6th June, what stole the financial headlines?

Global equity markets were boosted by further good news emanating from the US employment market. While the headline unemployment rate remained unchanged at 6.3%, US employment has returned to its pre-financial crisis level, with the economy recouping the 8.7 million jobs it lost during the recession. In Europe, Russian President Vladimir Putin came face to face with his Ukrainian equivalent, Petro Poroshenko, for the first time during the 70th anniversary commemoration of the D-Day landings. Meanwhile, Russians are more hostile towards the West than at any time since the break-up of the Soviet Union, according to the country’s leading independent pollster Levada-Centre. Finally, Chinese state media launched a publicity offensive against Google and other US technology companies as the Chinese administration ramped up its spat with the US over cyber espionage.

Headline Hotlist & World/ Asset Returns Source: The BNY Mellon Investment Strategy and Solutions Group (“ISSG”) as at 10/06/14. ISSG is part of The Bank of New York Mellon.

Global equity markets were boosted by further good news emanating from the US employment market. While the headline unemployment rate remained unchanged at 6.3%, US employment has returned to its pre-financial crisis level, with the economy recouping the 8.7 million jobs it lost during the recession. In Europe, Russian President Vladimir Putin came face to face with his Ukrainian equivalent, … read more

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The week that was…

In the week ending 29th May, what stole the financial headlines?

Russia and its ongoing stance on Ukraine continued to dominate the headlines. This follows Russia’s recent announcement of a 30-year gas deal with China – a move that signifies a notable trading shift away from Europe and the West. Elsewhere, the rally in emerging market currencies has showed signs of stalling in recent weeks amid central bank policy action. Meanwhile, US President Barack Obama was accused of a lack of tact as he became embroiled in a war of words between the Chinese and Japanese governments with regards to disputed territories in the South China Sea.

Headline Hotlist & World/ Asset Returns Source: The BNY Mellon Investment Strategy and Solutions Group (“ISSG”) as at 30/05/14. ISSG is part of The Bank of New York Mellon

Russia and its ongoing stance on Ukraine continued to dominate the headlines. This follows Russia’s recent announcement of a 30-year gas deal with China – a move that signifies a notable trading shift away from Europe and the West. Elsewhere, the rally in emerging market currencies has showed signs of stalling in recent weeks amid central bank policy action. Meanwhile, … read more

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The week that was…

In the week ending 8th May, what stole the financial headlines?

Pro-Russian rebels declared a resounding victory in referendums on self-rule in the eastern regions of Ukraine. The EU had denounced the referendums as illegal and moved closer to extending sanctions to companies, as well as individuals, linked to the annexation of Crimea. Meanwhile, the proposed £63bn bid by Pfizer for AstraZeneca triggered a political storm, with concerns about potential job losses.

Headline Hotlist & World/ Asset Returns Source: The BNY Mellon Investment Strategy and Solutions Group (“ISSG”) as at 12/05/14. ISSG is part of The Bank of New York Mellon

Pro-Russian rebels declared a resounding victory in referendums on self-rule in the eastern regions of Ukraine. The EU had denounced the referendums as illegal and moved closer to extending sanctions to companies, as well as individuals, linked to the annexation of Crimea. Meanwhile, the proposed £63bn bid by Pfizer for AstraZeneca triggered a political storm, with concerns about potential job … read more

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