Insigneo Adds Jeannie P. Adams From Morgan Stanley

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Insigneo announced on Wednesday the hiring of Jeannie P. Adams from Morgan Stanley.

“This significant addition is the result of a joint effort by Insigneo’s Market Heads in New York and Miami,” says the statement accessed by Funds Society.

Before joining Insigneo, Adams dedicated her career to advising high-net-worth Latin American families.

She began her career at Lehman Brothers, where she traded commodities and futures, and expanded her expertise at Prudential Securities and UBS Wealth Management, guiding families through political and investment challenges. Over the past decade, she has been an International Financial Advisor at Morgan Stanley, specializing in risk management, wealth planning, tax treaties, and multigenerational solutions.

“She has focused on providing clients with a sense of control and stability over their complex financial situations,” adds the firm’s statement.

Born in New York and raised in Santiago, Chile, she was influenced by her father’s legacy in the financial industry.

“I am delighted to join the talented team at Insigneo, where our top priority is to offer exceptional advice and service to our clients,” said Adams when asked about her new role at Insigneo.

Adams’ addition to the Insigneo team represents a great asset to the firm, as her extensive experience and commitment to excellence will drive unparalleled growth and innovation in Insigneo’s wealth management services, said the firm’s executives.

“We are very fortunate at Insigneo to have someone of Jeannie’s caliber in our network of financial advisors. We look forward to working with her in the years to come,” added José Salazar, Head of the Miami Market.

Finally, Alfredo Maldonado, Head of the New York Market, expressed his happiness at reuniting with Adams after knowing her for 17 years.

“I am thrilled to welcome Jeannie Adams to the Insigneo team! I have had the pleasure of knowing Jeannie for over 17 years, and her professionalism and dedication to building strong client relationships are truly impressive. I have no doubt that she will be a valuable asset to our firm,” concluded Maldonado.

Why Will Equities Be One of the Major Stars of the Second Half of the Year?

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The presentation of the semi-annual outlook by international asset managers has highlighted three common ideas: the impact of monetary policy decisions by major central banks, the increase in geopolitical risks, and the importance of being invested in both traditional and alternative assets. In this context, the main risk for investors is staying out of the market, given the numerous sources of uncertainty and volatility on the horizon for the next six months.

According to the managers’ projections, global growth expectations are set at 3.1% in 2024 and 3% in 2025. Inflation is expected to normalize in 2024, allowing central banks to continue cutting rates, although not all at the same time. In this regard, a renewed spike in inflation after the U.S. elections is a risk that investors should watch.

Benjamin Melman, Global CIO of Edmond de Rothschild AM, notes that a year ago, the economy presented many uncertainties, as disinflation remained tepid and there were fears of a recession in the United States. However, political difficulties were relatively contained at that time. Since then, the issues have reversed. “While the economic environment now seems quite promising, it is overshadowed by political problems. The only constant has been the continuous deterioration of the geopolitical environment. This means that there could be some volatility triggered by political turmoil in France or the potential return of Trump to the White House. The good news is that markets can sometimes overreact to political crises, which can create some attractive opportunities,” Melman states.

Taking this into account, the CIO of Edmond de Rothschild AM suggests that “considering the returns recorded so far this year and the strength of the global economy, it makes sense to remain well exposed to equities.”

Opportunities in Equities

“The economic context supports profits and risk assets, but most of the upside potential is already priced in by the markets, and it will be challenging to find clear catalysts for new gains. To navigate this uncertain transition to the next phase of the cycle, we favor high-quality equities, along with a positive bias in duration and commodities to protect against inflationary risks,” adds Vincent Mortier, Group CIO of Amundi.

When discussing specific opportunities, Melman notes that within equity markets, “while the main geographical decisions (U.S. versus Europe) will largely be determined by the aforementioned political issues, the investment teams prefer Big Data and Healthcare, as well as European small caps, which are trading at very attractive valuations considering the more favorable economic environment and the monetary easing that has already begun.”

Mortier expands on his idea of high-quality equities: “Avoid concentration risks and focus on quality and valuation.” He adds that opportunities abound in U.S. quality and value stocks and global equities. “Also consider European small caps that could capitalize on the economic cycle recovery, with attractive valuations. In terms of sectors, our position is balanced between defensives and cyclicals at the lower end of the range. We are more positive on financials, communication services, industrials, and healthcare,” states Mortier.

He also believes that emerging market equities offer interesting opportunities and relatively attractive valuations compared to the U.S. “We favor Latin America and Asia, highlighting India for its robust growth and transformation trajectory,” he adds.

Ronald Temple, Chief Market Strategist at Lazard, expects to see a broadening of the equity market rally driven by better earnings growth outside the technology sector. “This broadening does not mean that tech and AI stocks will stop performing. However, it is likely that the gap between tech leaders and the rest of the market will narrow, or even reverse, as investors realize that the rest of the market has largely stagnated for more than two years and now offers more attractive return potential,” he argues.

Temple also notes that non-U.S. markets are trading at much less demanding valuation multiples and are expected to benefit from accelerated growth while the U.S. market slows down. “Additionally, non-U.S. companies are often more exposed to variable-rate debt, which should benefit them as the ECB and other central banks ease monetary policy before the Fed, and they could also experience a more significant recovery in revenues and profits from current levels,” he concludes.

Ashish Shah, Chief Investment Officer, Public Investing at Goldman Sachs Asset Management, estimates that in equity markets, stronger business models have demonstrated margin resilience, with recent earnings seasons in the United States exceeding expectations. Performance has expanded beyond the so-called Magnificent Seven.

“The second half of 2024 may present opportunities for investors to broaden their horizons beyond the largest names, with U.S. small-cap companies poised to rebound, offering attractive absolute and relative valuations. Small-cap companies can provide access to greater growth potential from future mid- and large-cap leaders. Certainty around rate cuts should provide additional tailwinds,” Shah points out.

Regarding Europe, he adds that “the improved growth and inflation mix in Europe, combined with better corporate earnings dynamics and modest valuations, bodes well for continental European equities.” In the Japanese equity market, he sees great opportunities as structural changes are driving good performance after decades of deflation.

Franklin Templeton Expands Its Range of ETFs with a New Japanese Equity Fund

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Franklin Templeton expands its range of passive funds with the launch of the Franklin FTSE Japan UCITS ETF, the first ETF to track the Japan index. According to the manager, this brings the number of indexed funds offered to investors to 22.

The Franklin FTSE Japan UCITS ETF invests in large and mid-cap stocks in Japan. It is passively managed and tracks the performance of the FTSE Japan Index – NR (Net Return), a market-capitalization-weighted index representing the performance of large and mid-sized companies in Japan, aiming to capture 90% of the investable Japanese equity market universe.

“We are pleased to offer this new single-country index-tracking UCITS ETF that invests in Japanese equities to European investors. Investors can now gain diversified exposure to over 500 Japanese companies across a wide range of industries. The Japanese stock market is the second-largest stock market in the Asia-Pacific region and the largest developed market in the region. After decades of deflationary trends, Japan’s central bank recently stated that it sees a virtuous cycle between wages and prices intensifying, which should help boost consumption and investments. The country’s strong position in the global technology supply chain, including semiconductors, along with a renewed focus on corporate governance and shareholder value, should also favor the domestic stock market,” highlighted Caroline Baron, Head of ETF Distribution for EMEA at Franklin Templeton.

The new ETF will provide European investors with cost-effective and UCITS-compliant exposure to Japanese stocks, with one of the lowest total expense ratios (TER) in Europe for its category, at 0.09%. It will be managed by Dina Ting, Head of Global Index Portfolio Management, and Lorenzo Crosato, ETF Portfolio Manager at Franklin Templeton, who have more than three decades of combined experience in the asset management industry and extensive track records in managing ETF strategies.

According to Matthew Harrison, Head of Americas (excluding the US), Europe, and the UK at Franklin Templeton, following the launch of the Franklin FTSE Developed World UCITS ETF a few weeks ago, the manager is expanding its offering of core index-tracking equity products with the launch of this new low-cost FTSE Japan ETF. “With a market capitalization of $6 trillion and Japanese market returns expected to recover, Japanese equities can be a core portfolio building option for an investor’s portfolio,” highlights Harrison.

The Franklin FTSE Japan UCITS ETF will be listed on Deutsche Börse Xetra (XETRA) on July 30, 2024, on the London Stock Exchange (LSE) and Euronext Amsterdam on July 31, 2024, and on Borsa Italiana on September 4, 2024. The fund is registered in Austria, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Spain, Sweden, and the United Kingdom.

The SEC Accuses Andrew Left and Citron Capital of Fraud

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The SEC has announced charges against Andrew Left and his company, Citron Capital LLC, for participating in a multi-year, $20 million scheme to defraud followers by publishing false and misleading statements about their purported securities trading recommendations.

The SEC’s complaint alleges that Left, who resides in Boca Raton, Florida, used his Citron Research website and related social media platforms on at least 26 occasions to publicly recommend taking long or short positions in 23 companies, claiming that these positions were consistent with his own and Citron Capital’s positions.

The complaint alleges that following Left’s recommendations, the targeted stock prices moved by an average of more than 12%. According to the complaint, once the recommendations were issued and the stock prices moved, Left and Citron Capital quickly reversed their positions to capitalize on the stock price movements.

As a result, Left bought back shares immediately after telling his readers to sell and sold shares immediately after telling his readers to buy, the SEC’s statement adds.

“Andrew Left took advantage of his readers. He earned their trust and induced them to trade on false pretenses so he could quickly reverse course and profit from the price movements following his reports,” said Kate Zoladz, Director of the SEC’s Los Angeles Regional Office.

Zoladz added that these alleged bait-and-switch tactics led Left and his company to illicitly gain $20 million in profits and emphasized that the SEC seeks to hold Left and his firm accountable for their actions.

Among the “false and misleading” statements cited by the SEC, the complaint alleges that the defendants told the market they would stay long on a target stock until its price reached $65 when, in reality, they began selling the stock immediately at $28.

The SEC also alleges that they falsely claimed Citron Research was an independent research medium that had never received compensation from third parties for publishing information about target companies, whereas the defendants had actually signed compensation agreements with hedge funds.

The SEC’s complaint, filed in the U.S. District Court for the Central District of California, charges Left and Citron Capital with violating the anti-fraud provisions of the federal securities laws. Among other remedies, the complaint seeks disgorgement, prejudgment interest, and civil penalties against Left and Citron, as well as conduct-based injunctions, an officer and director bar, and a penny stock bar against Left.

In a parallel action, the DOJ’s Fraud Section and the U.S. Attorney’s Office for the Central District of California announced charges against Left.

Additionally, the SEC previously settled public administrative charges against the Dallas-based registered investment advisor Anson Funds Management LP and the Toronto-based exempt reporting advisor Anson Advisors Inc. for conduct related to their relationship with Left and other short-selling publishers.

Peter Stockall Returns to Tigris Investments to Strengthen the Firm’s Expansion in US Offshore and Latam

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Tigris Investments announced this Tuesday the appointment of Peter Stockall as Managing Director, Head of the Financial Intermediaries Channel focused on business expansion in US Offshore and Latin America.

Stockall, based in Miami, returns to Tigris to oversee the company’s organic growth strategy. He was a member of the founding team of Tigris Investments and now returns after taking a break for family reasons.

“At Tigris, we have a very clear vision that we only want to partner with highly specialized managers with exceptional track records. Differentiation in finding these gems is our added value. Peter will be responsible for articulating the message and ensuring that our products and managers are very close to the clients. Traditional marketing in our philosophy is secondary; our main marketing is to ensure that we find top-level managers with great results,” said José Castellano, Founding Partner, and Chairman of Tigris Investments, in an exclusive interview with Funds Society.

Stockall has more than two decades of experience in financial services, developed both in the United States and Latin America. Throughout his career, he has held positions at Carmignac (2017-2019), Pioneer Investments (2012-2016), and IMGP (2019-2022).

The executive brings more than 20 years of experience in the sector, and from Tigris “we share the vision of identifying market inefficiencies and leveraging them to create valuable opportunities for our clients’ needs,” the firm’s statement added.

Currently, Tigris works with clients across the region, such as brokers, private banks, and family offices, among others, explained Castellano, who added that the firm’s message “has resonated very well” and the results of Tigris managers support this.

“Initially, our most sophisticated clientele quickly receives and aligns with the message as soon as they see our product. Generally, in the market, there is still a bias towards universal managers with a strong commercial positioning and positive perception, but we believe this will dissipate towards managers capable of consistently generating results even if they don’t invest as much in marketing. Selectors also receive the message very well, as they know exactly the benefits of being independent and specialized, and they have more leeway to choose boutique managers,” detailed the Founding Partner.

Additionally, he will work on creating a team with strong cultural foundations based on service quality and the cutting-edge investment capabilities of the firm’s business partners.

“Tigris is confident that Peter’s passion for the business will be decisive and is very excited about what lies ahead for the company and its partners,” added Castellano.

“We recognize that our market is saturated and overly concentrated with asset managers; however, we firmly believe that the market share of high-quality independent managers remains minimal. This leaves us and our clients plenty of room to improve portfolios and allow for true differentiation,” stated Stockall.

Tigris has reinforced its mission to bring in the highest quality managers with a strong research team led by Manuel Sánchez Castillo, who will also oversee all corporate activity of the company.

The US Offshore Region

In nearly 30 years since Tigris executives started in the industry, they have seen the US Offshore and Latin America market evolve **“and it’s true that it hasn’t stopped growing in assets and all kinds of players, but I think today the ‘lion’s share’ is with universal managers just as it was 10 years ago, and this is where we see the opportunity. The large managers increasingly compete in marketing while becoming more passive due to the enormous volumes they handle,”** reflected Castellano.

However, in parallel, a great ecosystem of top managers has emerged who **“have decided to have their own boutique where they don’t have a CIO telling them where to invest, nor do they have to comply with corporate bureaucracy rules, but instead focus on making the best investments. This is just a small reflection of where the industry is going between passives where critical mass is fundamental and alpha, which is exactly the opposite. This is where we analyze and find the best alpha-generating managers,”** said Castellano.

Castellano, who assured that he is not worried about market share, stated that on the service side **“there is an oversaturation of marketing and salespeople, and specialization is necessary.”**

**“Today, personal interaction with clients is much more difficult, but the number of wholesalers continues to grow. For us, the key is the quality of the product and correct communication with the client; this is the best marketing,”** he concluded.

What Changes and What Doesn’t with Biden’s Withdrawal?

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New twist in the U.S. presidential race. Finally, Joe Biden, the current president and Democratic candidate, has announced his withdrawal from re-election, stating in a social media release, “in the interest of my party, the country, and my personal interest.”

In the same statement, Biden added, “Although my intention was to seek re-election, I believe that the best course for my party, the country, and myself is to withdraw and focus solely on fulfilling my duties as president for the remainder of my term.” While Biden has committed to addressing the nation in the coming days to provide more details about his decision, the big question now is who from the Democratic Party will challenge Trump. So far, Kamala Harris has confirmed her candidacy for the presidency, already receiving Biden’s explicit support.

In recent days, the pressure for Biden to make this decision had been mounting, but the doubts about his candidacy began with his performance in the debate against Trump. After the debate, Libby Cantrill, Head of Public Policy at PIMCO, explained that the decision to stay in the race was solely his, not the Democratic Party’s or the donors’.

“Biden currently controls 99% of the delegates, and what happens with those delegates is his decision. Of course, no candidate has withdrawn this late in the race. The party has planned its entire campaign around his candidacy, and it’s important to note that presenting a new candidate is incredibly complicated; there is no clear consensus alternative,” Cantrill said earlier this month. At that time, the PIMCO expert saw Biden’s withdrawal as “unlikely,” though he acknowledged that the chances were higher than before the debate. “If that outcome occurs, we believe an announcement will be made in the next week or two,” he noted. In this sense, Cantrill’s predictions have come true.

Another prediction gaining strength is that Trump will win the election. Just hours later, polls already show that his candidacy has been reinforced, as was the case after the assassination attempt he survived last week. For example, in a poll conducted by Bendixen & Amandi Inc., Kamala Harris has a one-point lead over Trump, surpassing him 42%-41%. However, according to a CNN and SSRS poll, the Republican candidate has 47% of the vote, while Harris has 45%, “a result within the margin of error suggesting no clear winner in such a scenario,” they explain.

The next step is clear: Democratic delegates will select a new candidate for the nomination just a few weeks before the Democratic Convention, in a race against time to garner the necessary support for the November elections. “So far, the only sure bet is Kamala Harris. Biden has expressed his support for the vice president, and she has accepted to take his place. Harris finds herself in a delicate position at a time when a Trump victory is being discounted. On the Republican side, Trump has proclaimed Ohio Senator J.D. Vance as the party’s vice-presidential candidate. Additionally, he announced some of his proposals, such as reducing the maximum corporate tax rate, imposing more tariffs, and keeping Powell as Fed chairman until the end of his term,” Banca March experts point out.

What Would Change

A clear change is that the scenario of a victorious Trump, explained by managers in their semi-annual outlooks, is gaining strength. For example, when Paul Diggle, chief economist at abrdn, addressed these scenarios, he pointed to one where Biden would win and three variants of a Trump presidency depending on the combination of policies.

In this sense, Diggle analyzed and measured the impact of Trump returning to the White House. “First, a Trump focused on the trade war, with a 30% probability. A divided Congress could see him pursuing those aspects of his agenda through executive order, drastically increasing tariffs. This would put upward pressure on inflation, lower growth, and slow or halt monetary easing,” he explained.

Secondly, Diggle contemplated, with a 15% probability, a scenario marked by an “all-out” Trump, combining trade measures with tax cuts and increased spending under a unified Congress. In his opinion, this would likely cause significant market volatility. And thirdly, “a market-friendly Trump focused on tax cuts, deregulation, and the appointment of establishment figures, with a 10% probability. The economy and risk markets could perform well,” Diggle pointed out.

Another aspect currently under debate is whether a second Trump presidency would mean higher inflation now that it seems to be subsiding. “In our opinion, Trump’s policy mix would likely be more inflationary than a continuation of Biden’s policies, implying that in 2025 the Fed would apply fewer rate cuts in this case,” noted Claudio Wewel, currency strategist for J. Safra Sarasin Sustainable AM.

In the opinion of Michael Strobaek, Global CIO of Lombard Odier, a second Trump administration would be more inflationary. According to Strobaek, the U.S. currency might appreciate further as the dollar is likely to rise in anticipation of additional tax cuts in 2025, “America-first” import tariffs, and the possibility of stricter immigration policies restricting the labor market.

“These inflationary pressures would lead to higher long-term bond yields and a steeper U.S. yield curve. This is one of the reasons why we prefer German bunds to U.S. Treasury bonds while maintaining exposure to global fixed income at strategic levels. In equities, we continue to favor non-U.S. markets, where valuations and market concentration risks are lower. We maintain U.S. stocks at strategic levels,” adds Lombard Odier’s Global CIO.

As Bloomberg explained this Saturday, “while the Republican Party has been trying to blame Biden for residual inflation, it is Trump’s plans that could undo the hard-won progress of the Federal Reserve.” In this sense, they noted that “economists warn that his policies, another round of tax cuts that, according to Democrats, will go to the wealthy, widespread tariff hikes to trigger another trade war with China, and immigration restrictions that Republicans blocked earlier this year, will wreak havoc on global trade and reignite inflation.”

In fact, a group of 16 Nobel laureates signed a letter stating that Trump’s arrival would bring higher prices. “Many Americans are concerned about inflation, and there is a legitimate concern that Trump will reignite it due to his fiscally irresponsible budgets,” they said in the letter. Among the signatories are George A. Akerlof, Sir Angus Deaton, Claudia Goldin, Sir Oliver Hart, Eric S. Maskin, Daniel L. McFadden, Paul R. Milgrom, and Roger B. Myerson.

What Wouldn’t Change

While Biden’s decision gives the campaign a major twist, some macro aspects may remain unaffected, as one of the main theses experts have defended so far is that, in terms of monetary policy or public deficit, for example, the electoral outcome wouldn’t matter.

For example, Steve Ellis, Global CIO of Fixed Income at Fidelity International, recently explained that in the medium to long term, there are even greater problems for the Fed. “Regardless of whether Biden or Trump wins in the November elections, we will likely see more budget deficits added to an outstanding U.S. public debt that already hovers around $35 trillion. To continue financing this and attracting investors, either real interest rates remain relatively high, or real yields do. That will limit the interest rate easing the Fed can apply, and considering that around 40% of the notional volume of high-yield debt in circulation will have to be refinanced at significantly higher levels over the next three years, the pressure on the U.S. economy will increase.”

Experts have also focused heavily on analyzing market behavior during other election processes. “Equity markets tend to welcome a decisive victory for Republicans in the White House and Congress, but have generally reacted worse to Republican presidents without absolute majorities. While returns are usually positive in election years—albeit a bit weaker than usual—they can rebound strongly once the elections are over,” explained Erik L. Knutzen, Chief Investment Officer and Multi-Asset Director at Neuberger Berman, at the end of May.

The First Members of Generation X Are Approaching Retirement and Are Worried

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The first members of Generation X are approaching 60, the age at which, according to the regulations of some countries, they can begin their retirement. However, instead of welcoming the prospect of retirement with hope and enthusiasm for a new life, the first members of this generation are worried, according to a survey conducted by Natixis Investment Managers (IM).

According to the data reported in a statement, nearly half of Generation X (48%) believe it will take a miracle to retire securely, while the other half (50%) avoid thinking about their retirement altogether.

Additionally, 60% of the first members of Generation X nearing retirement accept that they may have to work longer. However, many are aware that employment does not offer guarantees, and 47% fear they will not be able to work as long as necessary.

Respondents were asked about their retirement goals and, on average, they said they plan to retire at 60, an early age by many global standards, and anticipate that retirement will last 20 years, a shorter period than many retirees experience today.

Nevertheless, to achieve this, they save only an average of 17% of their annual income. Despite Generation X members being optimistic about their investments and having long-term return expectations of 13%, Natixis warns that this may be hindered by a misguided view of risk.

Inflation and Debt: Critical Issues

According to the survey results, two critical issues seem to be shaping this generation’s thinking about retirement: inflation and debt.

In the short term, members of this cohort face the reality of inflation. In general, 83% of surveyed Generation X investors say that the recent bout of inflation has revealed the magnitude of the threat that rising prices pose to retirement security.

Additionally, nearly seven in ten (69%) say that inflation has affected their ability to save for retirement, and more than half (55%) report that they are saving less due to high daily costs.

While inflation is a relatively short-term phenomenon, Generation X’s retirement outlook is being shaped by another key long-term aspect: public debt.

For this reason, more than three-quarters of respondents (77%) are concerned that the increase in public debt will lead to fewer retirement benefits. Even minimal cuts could have a significant impact, as 58% believe it will be difficult to make ends meet without benefits.

The first members of Generation X nearing retirement face a volatile and challenging landscape, ironically very similar to what they experienced during their working lives, marked by periods of global economic instability, outlined the Natixis study.

Texas Increases Its Housing Inventory by 41%

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Active home listings for sale in Texas reached 125,398 in the second quarter of this year, an increase of nearly 41% compared to the same period last year, according to the Texas Quarterly Housing Report published by Texas Realtors.

Meanwhile, the statewide median price of $345,000 was just 0.6% higher than in the second quarter of 2023, while the number of homes sold decreased by 3% to 93,417.

“With today’s higher rates, some buyers are on the sidelines waiting for rates or home prices to drop,” said Jef Conn, president of Texas Realtors. Conn also noted that even in markets with an increase in the supply of homes for sale, some sellers are holding out for the higher prices seen during the pandemic.

“Homeowners looking to sell quickly will want to ensure their home is in good condition and priced competitively,” he added.

Average prices increased moderately in most Texas markets.

The median price rose in 22 metropolitan areas and fell in four. The largest increases in median prices were in Odessa (11.7%), Abilene (11.2%), San Angelo (8.4%), and Midland (6%). The four metropolitan areas with decreases in median prices experienced moderate declines: Austin-Round Rock-San Marcos (-3.2%), Lubbock (-4.1%), San Antonio (-1.3%), and Texarkana (-2.5%), the report adds.

More listings drove the increase in months of inventory.

Months of inventory, a statistic that measures how long it would take to sell the homes currently on the market at the current sales pace, increased from 3.1 months at the end of the second quarter last year to 4.6 months in the second quarter of this year. This marks the highest number of months of inventory in at least eight years.

Odessa was the only market where months of inventory decreased and the only area in Texas to record a decrease in listings compared to last year.

Statewide, homes spent the same number of days on the market compared to the second quarter of last year. However, days on market increased in 20 metropolitan areas and decreased in six.

The data for the Texas Quarterly Housing Report is provided by the Data Relevance Project, a partnership among local Realtor associations and their MLSs, and Texas REALTORS®, with analysis from the Texas Real Estate Research Center.

Five Funds to Enjoy the Olympic Games

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The Paris 2024 Olympic Games will feature no fewer than 32 sports, each with various disciplines. Among them is modern pentathlon, consisting of five different sports: fencing, freestyle swimming, equestrian show jumping, pistol shooting, and cross-country running. This event is like a microcosm of the Olympic Games themselves: five very different sports requiring diverse skills, yet somehow working together to form a whole.

According to Victoria Hasler, Head of Fund Analysis at Hargreaves Lansdown, in many ways, modern pentathlon mimics fund management. “Any investment can be rewarding, but a portfolio of investments is usually much more beneficial. Just as cross-training in different sports leads to fewer injuries for athletes, a well-constructed portfolio of different investments can lead to lower volatility and better outcomes for investors.” In this sense, Hargreaves Lansdown has identified five fund ideas to include in a “modern pentathlon” portfolio:

Fencing: Troy Trojan Fund

“The use of what are essentially swords can make fencing seem like an aggressive sport. In reality, there is as much skill in defense as in attack. The managers of the Troy Trojan Fund, Sebastian Lyon and Charlotte Yonge, work with a similar philosophy, seeking to protect investors’ wealth as much as grow it. Instead of aiming for exorbitant returns, the fund seeks to steadily grow investors’ money over the long term while limiting losses when markets fall,” says Hasler.

Freestyle Swimming: BNY Mellon Multi-Asset Balanced Fund

In a freestyle swimming race, competitors are free to swim any stroke they choose (though it is extremely rare to see swimmers use anything but the fastest stroke: the crawl). According to Hasler, multi-asset fund managers have similar freedom, able to choose the markets and instruments most suitable to conditions.

This is the case with the BNY Mellon Multi-Asset Balanced Fund, which focuses on companies with good long-term prospects worldwide, along with some bonds and cash to act as diversifiers. The underlying universe of possible investments for this fund is large and includes emerging markets, smaller companies, high-yield bonds, and derivatives. For those who like a free approach but don’t want to make asset allocation decisions themselves, a fund like this could be a good option.

Equestrian Show Jumping: Invesco Tactical Bond Fund

Equestrian show jumping requires real skill. Not only must the rider be one with the horse, but together they must navigate various obstacles while appearing calm and completely in control. For Hasler, bond markets are similar, and bond managers must also possess the skills to navigate the obstacles of the global economy and geopolitics. The managers of the Invesco Tactical Bond Fund do just this.

“The fund is co-managed by Stuart Edwards and Julien Eberhardt, who can invest in all types of bonds, with very few restrictions imposed on them. The fund’s performance depends on their ability to interpret the broader economic landscape. They seek to protect the portfolio when they foresee tough times ahead; and seek strong returns as more opportunities arise. Depending on the managers’ views, at different times, this can be a relatively high-risk bond fund or be managed conservatively. Calm, serene, and always in control: the dream of a show jumper,” she explains.

Pistol Shooting: Rathbone Global Opportunities Fund

Shooting a pistol is a deliberate and specialized skill, but one that must be used with caution and control. This is similar to the skill of James Thomson, the manager of the Rathbone Global Opportunities Fund. The fund invests in global stock markets (including the UK) and gives exposure to a wide range of stocks. Thomson is undoubtedly a skilled investor and one of the few global fund managers who has demonstrated that he can pick great companies and outperform the broader global market over the long term.

“His success is due to a simple, skillful but disciplined approach, and a willingness to see the world a bit differently. Global equity markets can be a minefield, but Thomson navigates them with ease. He shows all the characteristics that a great pistol shooter should have: skill, caution, and control,” adds Hasler.

Cross-Country Running: iShares Emerging Markets Equity Index Fund

Cross-country running requires endurance and adaptability. These are characteristics we also see in emerging markets funds. From large Asian countries like China and India to Brazil and Mexico in South America, these countries offer much potential as part of a portfolio for investors looking for long-term growth opportunities. But it may take time for them to fully develop, so the risks are higher, and higher levels of volatility should be expected.

“The iShares Emerging Markets Equity Index Fund aims to track the performance of the broader emerging markets equity market and is one of the lowest-cost options for investing in these markets. The fund invests in a wide range of companies based in emerging countries, including China, India, Brazil, South Africa, and Taiwan. It’s a convenient way to invest in emerging markets. However, there is potential for volatility along the way, so investors may need endurance,” concludes the analyst.

Fund Performance vs. Benchmark Index

Biden, Trump, and Harris: Three Pieces in a Game with a Timid Impact on the Markets So Far

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“I deeply respect this office, but I love my country more. It has been the honor of my life to serve as your president. However, I believe that defending democracy is more important than any title.” With these words and a brief 11-minute speech, Joe Biden, President of the United States, explained his decision to withdraw as a candidate for re-election. This marks the end of a week dominated by analyses of how this shift will affect the market in the race for the White House.

Undoubtedly, the first question to answer is who will replace Biden as the candidate. For now, the name gaining the most traction—in terms of money and public support—is Kamala Harris. “In recent days, the idea of mini-primary elections has gained momentum, potentially allowing for a short and open competition among the best and brightest of the Democratic Party. This is particularly relevant since the approximately 4,700 delegates responsible for nominating a new Democratic candidate are not obligated to support any particular candidate following Biden’s decision to withdraw,” notes Kaspar Köchli, an economist at Julius Baer.

According to Ahmed Riesgo, CIO of Insigneo, although senior Democrats are not thrilled with Harris, it is widely assumed that she will perform better than Biden at this point. “Given the aggressive shift of consensus opinion towards a Red Wave in November, replacing Biden with Harris on the ballot could alter expectations somewhat,” says Riesgo.

In his view, “removing Biden’s vulnerabilities from the Democratic side should immediately reduce the polls, while Trump continues to face a myriad of political headwinds that will come to the forefront as people stop talking about Biden’s physical and mental capabilities.”

For now, Harris’s chances of winning the Democratic nomination are around 80%, but only the meeting of the Democratic National Convention’s Rules Committee on Wednesday will provide more clarity on how the coming weeks will unfold.

In Köchli’s opinion, a Harris campaign signals fiscal and trade policies consistent with Biden’s, reaffirming the status quo in the markets. “The market has reacted moderately, slightly improving the odds of a Harris presidency over Trump to 40%. Markets will closely watch if Democrats can use the momentum of change to expand support and overcome what one Democratic strategist described as a situation where Trump is unpopular, but Harris is simply unknown, thereby reducing the current slight Republican advantage in presidential and congressional races,” adds the Julius Baer economist.

Advantage for Trump

“We consider that if a Democratic victory occurs, it will be to maintain a scenario of political continuity, as what a Democratic presidency implies is reasonably predictable. However, there is still great uncertainty about what exactly a Trump presidency would mean for the economy and markets,” says Lizzy Galbraith, a political economist at abrdn.

Most analyses from investment firms agree that a Republican victory scenario is increasingly likely. What would be its impact on the market? According to Galbraith’s analysis, of the 60% chance of a Trump victory, three possible scenarios could arise: “A 2.0 trade war with a 30% chance; a 100% Trump with a 15% chance; and Trump fulfilling market expectations with another 15%.”

In Mathieu Racheter’s opinion, Head of Equity Strategy Research at Julius Baer, Trump’s victory favors cycles. “We expect a modestly positive initial reaction from the equity market following the election results. This is based on the prospect of laxer regulation, the application of antitrust mergers, financial sector regulation, and a likely extension of the Tax Cuts and Jobs Act (TCJA), which expires in 2025, alleviating fears of a corporate tax increase,” he notes.

These developments, along with increased fiscal spending, should lead to higher economic growth in the US (2.4% versus our forecast of 1.9%), resulting in higher profit growth for the equity market, according to Racheter. “Historically, during an election year, equity volatility tends to increase mid-year, just before the primaries, and begins to decrease after the elections. Depending on the results starting to reflect in the equity markets in the coming months, opportunities will open up for investors,” he elaborates.

According to George Brown, senior US economist at Schroders, a Trump victory could pose inflationary risks for the US economy. “The central pillar of Trump’s economic agenda is protectionism. If re-elected, Trump has proposed increasing it to 60% and gradually eliminating all imports of essential goods from China. Additionally, imports from the rest of the world would be subject to a 10% basic tariff. If implemented, these proposals would result in a significant inflationary shock. However, we suspect Trump does not intend to fully implement them but rather use them selectively to gain trade concessions,” explains Brown.

The consensus is that a Trump presidency would mean corporate tax cuts, deregulation, a reversal of the climate change agenda, and higher national tariffs. “We also expect a more aggressive foreign policy, especially against China, which could also be bad news for emerging markets. There is also likely to be less aid for Ukraine and less support for NATO,” adds Steven Bell, chief economist for EMEA at Columbia Threadneedle Investments. Finally, Bell states that the impact on the dollar is unclear, but both the fundamental context and the prospect of Trump 2.0 seem to favor equities. “But it is really a wait-and-see scenario,” he notes.

According to AXA IM, each candidate brings a different policy: “Trump would likely focus on tariffs, tax cuts, migration, and deregulation. His victory would also raise concerns about geopolitics, all of which would mean headwinds for growth. Harris is likely to adopt Biden’s plan to focus on partial extensions of tax cuts and deficit reduction with a milder crackdown on immigration. An opposition-led Senate would likely block the approval of that agenda.”

The Impact on Markets

As Garrett Melson, global strategist at Natixis IM Solutions, points out, “despite all the consternation around the winners and losers of the elections, historically the effect of elections is quite ephemeral, and the profit cycle ultimately determines market behavior after the elections.”

In general terms, he reminds us that the political repercussions in the markets tend to be short-lived. In fact, he points out that there are both upside and downside risks to consider in any election result, particularly a Trump victory, but he explains that companies have repeatedly demonstrated their dynamism and adaptability, suggesting that investors should have confidence in the markets’ ability to shake off any short-term impact from electoral events as the fundamental economic backdrop remains constructive.

“Trade remains a considerable wildcard and an area where Trump continues to have strong convictions and flexibility to act largely unilaterally without congressional approval. The increase in tariffs not only on China but also on Europe is likely to weigh on growth, both domestically and internationally. Tax cuts are a concern as the policy of the Tax Cuts and Jobs Act is extended and potentially new cuts are unveiled,” Melson specifies.

Finally, Michaël Nizard, head of Multi-Assets and Overlay at Edmond de Rothschild AM, believes Biden’s withdrawal could benefit European markets. “It would not be surprising to see a slight recovery in European risk assets compared to the US after several weeks of clear underperformance. In fact, several econometric studies show significant impacts on European growth, around 1%, in the event of a resurgence of strong trade tensions related to Trump 2.0. As for the ongoing sector rotation, we believe it may continue, and the recent underperformance of the technology sector will depend more on the upcoming earnings season than on the national political situation,” he explains.

Regarding the dollar, Nizard insists that the Republican candidate has been quite favorable to a depreciation of the greenback in the primary interest of American manufacturers. “We explain the dollar’s decline in July more as a response to the easing of US rates and the imminence of the first Fed rate cut in September. Thus, we consider that the dollar will stabilize awaiting new data. In the longer term, the widening of US deficits will raise the question of the sustainability of its financing and the valuation of the dollar,” he concludes.