Four Macro Scenarios for the Short and Medium Term, From the Most Positive to the Most Negative

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Despite central banks’ efforts to lower market expectations, they’ve caused so much volatility that dispersion is noticeable not only across different asset classes but also in macro predictions themselves. One of the most optimistic firms is Deutsche Bank Spain, which anticipates a new phase of global growth, with a gradual reduction in inflation figures and developed central banks cutting rates, a positive scenario for financial markets. Rosa Duce, their Chief Investment Officer, stated that “the global economy is entering a new bullish cycle.”

Duce recently explained at a press conference that her firm anticipates a 0.7% growth for the eurozone in 2024, which could rise to 1.1% in 2025 thanks to the boost from Germany. This recovery would be driven by real wage growth and an increase in external demand as the global economy revives, as well as the planned disbursements from the NextGen funds. Consequently, they expect the ECB to cut interest rates three more times by June 2025.

Spain is expected to surprise positively with its growth, projected at 2% for this year and 1.2% for the next, with room for upward revision, given that the country is benefiting from the boost in tourism, consumption, and greater strength in the labor market.

For the U.S., the firm expects an expansion by the end of 2024 and 2025, primarily driven by consumption, although the expert noted the need to delve deeper into the macro data. For example, observing the reduction in market participants or the increase in demand for a second job to supplement wages. “If these components were excluded, the U.S. unemployment rate would be around 7.5%,” Duce stated.

The expert mentioned that the U.S. “hides weaknesses” that could influence the Federal Reserve’s monetary policy (they anticipate a rate cut in 2024 and two more in 2025) but sees the country embarking on a new positive cycle of productivity driven by artificial intelligence, leading Deutsche Bank Spain experts to expect more growth in the medium term.

Alejandro Vidal, Head Investment Manager at Deutsche Bank Spain, explains that European corporate debt with an investment grade is currently at the heart of their strategy, although he recommends a barbell approach: adding positions in mega caps (they like the Magnificent Seven but also find opportunities in other market areas) and small caps, long in Asian equities, and positioning in IG corporate debt, especially financial.

UBP also shows an optimistic stance. Olivier Debat, product specialist, explains that his firm is working with a thesis of growth reacceleration, minimizing the possibility of a soft landing. They also anticipate more wage increases in the U.S. and Europe, with their consequent impact on inflation, which will remain more persistent than anticipated. However, they do not foresee major changes in monetary policy for the moment: “We do not see room for the ECB to continue cutting interest rates. The June cut was a technical reduction,” adds Debat.

Given this macro scenario, UBP declares itself positive on credit and cautious on sovereign debt. “We do not see a catalyst to adjust duration,” Debat comments, referring to the fact that, as the curve remains inverted, short segments continue to offer attractive remuneration and the possibility of investing in quality debt, assuming less risk.

The expert notes that currently, various segments within fixed income offer returns more typical of equities, so the firm also recommends a barbell approach, combining IG corporate debt with allocations to the riskier part of fixed income (high yield, AT1 bonds, CLOs) to obtain higher returns and diversification.

“After a decade in which the main source of return in fixed income came from the movement of spreads, now the focus is on the coupon that bonds can pay. This makes credit very attractive,” concludes Debat.

A New QE?

From M&G Investments, manager Richard Woolnough proposes an alternative scenario. The expert foresees that inflation and GDP will converge towards the neutral rate, a scenario that does not present “a great entry point for investing in bonds.”

Woolnough states that the world is heading towards a slowdown: “The economy is already overheated, but it has been shown that inflation can be reduced without causing a recession. The current question is whether banks will rush to recognize the risk of recession and lower interest rates prematurely, or if they will remain hawkish, maintaining the ‘higher for longer’ environment.” “The longer central banks maintain their hawkish stance, the greater the risk of a hard landing,” Woolnough concludes.

The manager has long been drawing attention to the levels of liquidity present in the system, given that major central banks have been systematically draining it. Looking ahead to the coming months, he presents an unusual thesis: “Central banks need to maintain an adequate amount of money in the system to encourage GDP growth. If they want to return to normal, they will have no choice but to start printing money again (QE).”

Bearish Signals

The most pessimistic stance is held by Henry Neville, manager of Man Group. Based on market behavior from 1800 to 2024, the manager states that the current environment of rising equities and falling bonds has only occurred historically 11% of the time, and he considers it a possible indicator of the proximity of a bear market. Neville highlights that valuations are very high and earnings forecasts are narrowing, asserting that “the bearish potential is significant in stocks.”

“We are in a relatively uncomfortable place, where small market movements can cause larger impacts than in the past, and where duration no longer offers the same protection as before, even with inflation falling,” the expert declares, adding that corrections the markets may experience in the future “could be more damaging than those in the past.”

In the long term, the manager’s forecast points to a bear market for equities versus commodities, reflecting the cost of the significant transitions the world is heading towards (energy transition, multipolar world, increasing debt…). In his opinion, the global economy is heading towards a period of secular stagflation, where yields will tend to rise in fixed income. “The level of uncertainty could increase in the next decade and, if this happens, risk premiums should be higher than they are today. The current premium offered by U.S. debt is too low,” Neville states, concluding: “This would implicitly harm equities and explicitly harm fixed income.”

The Ripple Effect of the Debate Between Biden and Trump

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The average age of CEOs of the companies on the Fortune 500 list is 58 years, with only three of them exceeding the age of 80: Warren Buffet, 93, and Robert Greenberg of Skechers, and Albert Nahmad of Watsco, both 83 years old.

Cognitive abilities decline to varying degrees as we age and affect our performance differently depending on the type of professional responsibilities we face. Additionally, from age 80 onward, the probability of death begins to increase exponentially, and the current president of the U.S., if victorious in November, would end his second term at 86 years old.

Therefore, it is surprising that the Democratic Party waited until last week’s debate to seriously consider Joe Biden’s suitability as a presidential candidate, something that could have been addressed almost a year ago when an  AP poll, widely covered by the media, showed that Americans believed Biden was too old to consider a second term as president.

Certainly, Donald Trump is also nearly an octogenarian (78). But at these ages, 3-4 years can make a difference, as evidenced by Biden’s decline since his inauguration in 2020, something reflected by 77% of respondents in a CNN poll, who overwhelmingly declared Trump the winner of the debate.

The ripple effect of the first Biden-Trump debate has yet to fully manifest in the polls, but an Ipsos analysis reveals that voters’ confidence in Biden’s ability to lead the country has further declined. The conclusion is echoed in a New York Times poll, which now gives Trump a 6-point lead (up from 3 points before the debate), and a Wall Street Journal poll showing the same gap, indicating that 76% of Democratic participants do not see Biden fit for another 4 years.

A Wall Street Journal article on Friday also began to reveal growing doubts among Democrats about Biden’s suitability as the party’s presidential candidate, who could be replaced by Kamala Harris (the most likely option) or Gavin Newsom, to prevent Trump from leveraging the debate result as an electoral weapon.

Initially, as the betting markets show (see graph below: PredictIt with a 59% probability of Trump winning after the debate, almost assuming Kamala Harris will replace Joe Biden on the ticket), this would be a damage-control move, as it would consolidate the votes of indecisive Democrats regarding Biden’s situation. But it would still be a patch. Either alternative would start with a disadvantage due to late entry into the campaign: the Democratic convention, the last opportunity to replace Biden, will be held in Chicago from August 19-22, with the election on November 7. On the other hand, Kamala Harris’ popularity, although higher than the current president’s, remains mediocre.

The markets’ reaction, in general terms, also indicates an increase in the Republican candidate’s electoral chances. After the recent rises, public debt prices adjusted downward for the long term (bear steepening) due to the perceived fiscal profligacy associated with the Republicans’ agenda; some Latin American currencies corrected in response to the threat of renewed trade sanctions and/or tariffs, and the stock market continued to rise.

Although the U.S. Treasury bond may suffer in the short term from a consolidation of Donald Trump’s leadership, Japan’s example (which in just over 20 years has seen its debt-to-GDP ratio rise from 100% to 225%) reduces the likelihood of the worst-case scenario. The U.S., like Japan, keeps a significant portion of its public debt at home (approximately 74.9% is held by domestic investors such as families, businesses, and federal agencies like Social Security and Medicare), with just over 23% held by foreign institutions, including central banks and financial corporations in international business centers like the UK, Switzerland, Luxembourg, or the Cayman Islands.

As long as the dollar remains the reference currency for international trade and investment, and despite the trend towards central bank diversification, it seems unlikely that the U.S. will face significant refinancing problems in the medium term.

It is also important to consider that, ceteris paribus, as highlighted by the latest report from the Congressional Budget Office (CBO), the trajectory of the U.S. budget deficit, estimated to remain close to 7% of GDP in 2034 with a debt-to-GDP ratio of 122%, should be a concern for both Democrats and Republicans alike, regardless of their base’s preferences, which do not lean towards austerity. The CBO estimates that Social Security will exhaust its resources by 2033, forcing whoever is in the White House then to cut benefits by approximately 20%-30% or significantly raise taxes.

Therefore, it is reasonable to think that if the Republican party wins the November elections, it will seek discretionary spending adjustments to at least partially offset a potential extension of the Tax Cuts and Jobs Act (TCJA, 2017), which expires in 2025. The risk to public debt valuation through an increase in the term premium remains distant, though it is certainly something to monitor.

Forecasts suggest that the cost of U.S. federal debt interest as a percentage of revenue will increase in the coming years. Based on the rise in debt levels and the 2022-2023 rate hike campaign, interest payments are expected to consume around 20.3% of revenue by 2025, surpassing the previous peak of 18.4% set in 1991.

In 2023, the U.S. government spent $658 billion on net interest payments, or 2.4% of GDP. Projections indicate this figure will continue to grow, potentially reaching 3.9% of GDP by 2034. This significant increase will pressure the federal budget, complicating the financing of other essential programs and services that are citizens’ rights (Medicaid, Medicare, Social Security, unemployment benefits).

The growing cost of public debt service is expected to exceed spending on key federal programs like Medicaid and defense in the next decade. By 2033, interest payments could account for 14% of total federal outlays, doubling the percentage spent in 2022.

Although the deterioration is undeniable, according to the World Bank database, the differences remain notable when comparing the U.S. situation to the debt crises that preceded those in New Zealand in the 1980s, Canada in the early 1990s, Greece, or Sweden.

Besides keeping inflation under control and preserving full employment, the Fed has a “third mandate” to ensure financial stability. In a context like the one depicted in the CBO report, this involves avoiding excessive tension on the cost of money.

In this regard, Jerome Powell’s statements in Sintra (where he explained that inflation seems to be “back on a disinflationary path”) and the minutes of the last Fed meeting (which expressed concern about growth and employment prospects) highlight the possibility of positive surprises regarding monetary policy direction. The core PCE is already below the target set for December 2024 (2.6% vs. 2.8%), and unemployment aligns with the forecast by U.S. central bankers (4%).

The updated JOLTs survey, which came out slightly better but adjusted May’s data downward, shows that unemployment claims have entered a clear upward trend, suggesting difficulties in reemployment after job loss. The weakness in the June ISM Services, surprisingly entering contraction territory (48.8 vs. consensus expectations of 52.7, with the new orders sub-index plummeting to 47.3 from 54.1 in May) or – as we explained last week – the stagnation in the nascent recovery in industrial activity pointed to by the ISM Manufacturing (48.5 vs. 49.1 expected, showing weakness in subcomponents of employment, export orders, and production) are symptoms of a slowing economy.

Fed members expressed concern in this regard, suggesting that the payroll series may be presenting an overly optimistic view of the labor market situation. They also noted that moderate/low-income households are facing increasing strain in coping with rising living costs, no longer benefiting from the savings accumulated during the pandemic.

The economy, as the data and Fed comments show, is slowing down. Investors remain in “bad news is good news” mode, and as we explained last week, the consensus is for a soft landing. Technically, the S&P is overbought, sentiment is optimistic, and the stock market is not cheap.

Soon we will hear management teams report their second-quarter performance, and expectations are high with 9% EPS growth, the largest since 2021.

Sentiment is now the main support for this market, which is why it is worth monitoring what “hot money” does. In this regard, bitcoin’s price is reacting to the dollar’s strength (and what it implies), breaking relevant support levels that could result in a much steeper decline. What relevance does this have for the stock market? Bitcoin, as shown in the graph, is a “steroid bet” on the movement in the equity market risk premium, and this week’s declines do not bode well for stockholders.

 

The European Union Already Has Common Regulations for the Prevention of Money Laundering and the Financing of Terrorism

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The new European Union regulatory package against money laundering and the financing of terrorism was published on June 19, following its approval by the European Council. The intention, according to the legislators, is to homogenize the current regulations on the prevention of money laundering and the financing of terrorism (PMLFT) across the Union.

Thus, as explained by experts from finReg360, the rules of the game for entities subject to this regulation are now equalized, with the aim of eliminating differences in the applicable regime among Member States and ensuring homogeneous supervision throughout the Union. “The published package contains relevant modifications and new rules of conduct, with which entities must familiarize themselves in order to comply with the new regulations within the adaptation schedule,” they note.

According to their analysts, the package includes various regulations. For example, the regulation that creates the new Authority for Combating Money Laundering and the Financing of Terrorism (AML Authority or AMLA), with regulatory powers, will directly supervise financial entities with the highest level of money laundering and terrorism financing risk and will hold indirect supervision over the rest, and will be able to impose sanctions and penalties.

Additionally, the regulation that consolidates and unifies the PMLFT rules, now known as the “single regulation”. This regulation revises the categories of obligated entities, introducing some new ones such as crowdfunding service providers, intermediaries of these services, and football agents and clubs, among others.

As explained by finReg360, the directive on mechanisms for combating money laundering and the financing of terrorism, which amends Directive (EU) 2019/1937 and repeals Directive (EU) 2015/849. The new directive is known as the “Sixth Directive“.

“The directive on the access of competent authorities to centralized bank account registers and the technical measures aimed at facilitating the use of transaction registers. Also part of the new regulatory framework is the regulation that consolidates the regulation on fund transfers, which seeks to make crypto-asset transfers more transparent and traceable (this text was already approved in May 2023 and is known as the Travel Rule),” they add.

Entry into Force and Application

Published in the Official Journal of the European Union, the new regulations come into force on July 9, 2024. The new European authority, which will be based in Frankfurt, will start operating in mid-2025. As recalled by finReg360, the single regulation will be applicable from July 10, 2027, except for agents and football clubs, to whom it will apply from July 10, 2029.

On the other hand, Member States must transpose the Sixth Directive by July 10, 2027, except for: Article 74, which must be transposed by July 10, 2025; Articles 11, 12, 13, and 15, by July 10, 2026; and Article 18, by July 10, 2029.

Snowden Lane Partners Announces the Addition of The Yarza Group

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Snowden Lane Partners has announced the addition of The Yarza Group, led by Jaime Sánchez Yarza, Senior Partner and Managing Director, along with José Andrés Ramírez, Portfolio Director and Senior Client Relationship Manager, and Paula Andrea Gonzales, Group Director and Senior Client Relationship Manager.

Based in Snowden Lane’s Coral Gables, Florida office, The Yarza Group manages assets worth one billion dollars and “is part of a values-driven, client-focused culture,” according to the statement.

The addition of The Yarza Group brings Snowden Lane’s total client assets to $13 billion, “building on a successful 2023 that included the addition of 12 advisors representing more than $2 billion in assets,” the statement adds.

“We are thrilled to officially welcome Jaime, José, and Paula to our Coral Gables team,” said Greg Franks, Managing Partner, President, and COO of Snowden Lane Partners.

Before joining Snowden Lane, Yarza spent 17 years at Morgan Stanley, most recently serving as Managing Director, and previously worked for nine years at Goldman Sachs.

He holds an MBA from Olin Business School at Washington University in St. Louis and a Bachelor’s degree in Finance from the Instituto Tecnológico Autónomo de México.

The Yarza Group will serve both domestic and international clients, specializing in providing services to ultra-high-net-worth individuals, families, and foundations.

Since its founding in 2011, Snowden Lane has built a national brand, attracting top talent from Morgan Stanley, Merrill Lynch, UBS, JP Morgan, Raymond James, Wells Fargo, and Fieldpoint Private, among others, the statement concludes.

iM Global Partner Announces the Integration of Its Offshore and U.S. Domestic Segments

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Photo courtesy

iM Global Partner has just announced changes to its structure, which include greater synergies between the domestic and U.S. Offshore segments of the United States. Philippe Couvrecelle, founder and chairman of the firm, shared this news on his LinkedIn account.

“As we continue to evolve and grow our global business, it is natural that we occasionally realign select business segments with client-driven demand and industry trends. We have seen significant synergies between our U.S. advisors and U.S. Offshore advisors. Building on this success, we are aligning our U.S. Offshore/Latin America team with U.S. Distribution under the global leadership of Jeffrey Seeley, Deputy CEO and Head of the U.S.,” expressed Couvrecelle.

The changes will be effective immediately, added the executive.

Alberto Martínez Peláez, Managing Director for Iberia, Latam & U.S. Offshore, told Funds Society that the changes will have “a significant impact on our business because our clients have told us that it is much easier for them to invest in the same strategy across different jurisdictions, using a wide variety of products such as 40 Act, UCIT, SMA, and ETF funds. Having such a broad range of products available means that our approach is more flexible and adaptable to our clients’ needs, and we believe it will give us a significant advantage.”

“I want to recognize the recent achievements of our U.S. Offshore team, led by Alberto Martínez Peláez, Luis E. Solórzano, and Melissa A., and the dedication of Jamie Hammond, Clément Labouret, and their teams, who have contributed significantly to this initiative. Their leadership, persistence, and collaboration have been fundamental to our success,” added Couvrecelle on the social network.

iM Global Partner is an asset management company founded in 2013, with offices in 11 countries. The company manages approximately $45 billion, according to figures from the end of April 2024.

Vontobel Completes the Purchase of a Significant Minority Stake in Ancala

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Vontobel has announced the successful completion of its acquisition of a significant minority stake in Ancala Partners LLP (Ancala), an independent private infrastructure manager based in London. This transaction, announced in February of this year, marks Vontobel’s entry into private markets, expanding its investment capabilities in the rapidly growing segment of private infrastructure.

According to Vontobel, this offering will allow clients to benefit from the diversification potential that this asset brings, supported by a low correlation with GDP and other major asset classes, as well as an attractive risk-adjusted return.

Ancala is one of the leading infrastructure managers, with total assets under management exceeding 4.1 billion euros, managing 18 assets operating in essential infrastructure sectors such as renewable energy and energy transition, transportation, utilities, and the circular economy. Since its founding in 2010, Ancala has implemented a consistent strategy that delivers higher returns on investments with traditional infrastructure characteristics.

Vontobel highlights that Ancala applies a differentiated approach focused on seeking bilateral investment opportunities, downside protection, inflation linkage, and cash yield, as well as applying a unique approach to creating sustainable value in its portfolio companies. Additionally, Ancala is led by a team of partners with extensive experience in investing and creating value in infrastructure assets across a wide range of economic cycles and essential sectors.

Vontobel emphasizes that this transaction strengthens its strong position in offering clients diversified and active strategies with long-term growth potential.

“With the global infrastructure market growing rapidly due to the need to replace outdated infrastructure and increased public investment in infrastructure, the transaction provides Vontobel with the capability to capitalize on the opportunities arising from these favorable factors and offer greater diversification to clients,” the asset manager explained in a statement.

Following the transaction, Ancala’s management team, led by Managing Partner Spence Clunie, will continue to independently manage the company’s day-to-day operations and maintain the independence of its investment and governance processes. “Ancala and Vontobel are fully aligned for future growth and success and have agreed on terms that allow Vontobel to acquire the remaining stakes in the long term. Ancala’s management team remains fully committed to its future,” they added.

Regarding the details of the transaction, they explained that it was financed with Vontobel’s own funds.

Utmost Group Signs an Agreement to Buy Lombard International

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New developments in the industry. Utmost Group has announced the signing of an agreement to acquire Lombard International. According to the company, this acquisition would unite two major companies in insurance-based wealth solutions, “strengthening Utmost’s position in key European markets and providing a solid platform to meet the long-term financial needs of its clients.”

The transaction, which is still subject to the necessary regulatory approvals, encompasses Lombard International’s European business, which will become part of Utmost International, the international life insurance business of Utmost Group. They highlight that by combining existing relationships with distribution partners, deep local market knowledge, and a range of complementary products, “the acquisition provides a solid platform for the Group to serve its clients and execute its strategic ambitions.”

Regarding the specific details of this transaction, both companies indicate that the purchase will add $54.8 billion in assets under management and more than 20,000 policies to Utmost International. Lombard International will continue to operate from Luxembourg with its current range of products, which will be distributed under the Utmost brand by a single combined global sales force in parallel with Utmost’s existing products, maintaining the existing distribution models of the combined group.

Additionally, they point out that the scale increase achieved through this purchase will allow Utmost to identify opportunities for efficiencies and capital synergies. “The Group will focus on leveraging the complementary capabilities of the combined entity to deliver value creation to stakeholders,” they note.

Key Statements

Following this announcement, Paul Thompson, CEO of Utmost Group, stated, “The acquisition of Lombard International marks an exciting milestone in Utmost’s journey, strengthening our position in Europe and establishing us as a leading global provider of insurance-based wealth solutions. The combined strength of the merger between Utmost International and Lombard International adds scale to the Group. It will enable us to better serve our expanded base of international clients and distribution partners, leveraging deep market knowledge, strong technical expertise, and a broader product portfolio.”

Thompson believes that the integration of Lombard International is highly complementary to Utmost’s previous transaction: the acquisition of Quilter International completed in November 2021, which strengthened their presence in the UK and Asia.

“Lombard International’s established and long-standing networks in Europe will enhance Utmost’s global credentials and enable us to better serve our clients and partners, delivering long-term value for our people and shareholders. I look forward to welcoming Lombard International’s people, clients, and partners to Utmost and working closely with Lombard International’s leadership to complete this transaction,” he added.

For his part, Stuart Parkinson, CEO of Lombard International Group, commented, “This acquisition marks a new and exciting chapter for Lombard International, ushering in a period of expanded opportunities for our clients, partners, and employees. The combined group will offer unparalleled service and expertise to support our clients’ evolving wealth planning needs. The strategic fit between Lombard International and Utmost, with a shared focus on growth and client-centricity, will enable the combined entity to continue its growth trajectory and capitalize on emerging opportunities.”

Finally, Florent Albert, Managing Director of Lombard International Assurance, added, “I am delighted that Lombard International is joining Utmost. Utmost has established itself as a leader in the insurance-based wealth sector, and I am confident that they will be excellent stewards for Lombard International’s clients, partners, and employees. I look forward to working closely with Paul, Ian, and the rest of the Utmost leadership team to integrate Lombard International into Utmost International.”

BNY Appoints José Minaya as Global Head of Investments and Wealth

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José Minaya will assume the role of Global Head of BNY Investments and Wealth on September 3, the firm announced this Tuesday. In his new position, he will report directly to President and CEO Robin Vince. Additionally, he will be a member of the company’s executive committee, succeeding Hanneke Smits, who is retiring after leading the company for several years.

“BNY manages money, moves it, and keeps it safe, and since the global wealth segment continues to grow rapidly, we are uniquely positioned to serve clients throughout the financial lifecycle,” Vince said in the company’s statement.

Minaya joins BNY from Nuveen, where he served as President and Chief Investment Officer, overseeing all global operational and investment activities in equities, fixed income, real estate, private markets, natural resources, alternatives, and responsible investments.

Minaya also has extensive experience at firms such as AIG, Merrill Lynch, J.P. Morgan, and TIAA.

He is a member of the Board of Trustees of Manhattan College and the Advisory Board of the Amos Tuck School of Business at Dartmouth, where he earned an MBA.

“I am delighted to join BNY, a historic institution with a legacy of helping clients achieve their ambitions and advancing the future of finance,” Minaya said. “Leading a world-renowned asset and wealth management franchise with deep relationships around the globe is an exciting challenge for me.”

Minaya’s appointment comes at a time when BNY is expanding its presence in the global wealth market.

Diagonal Investment Office Adds Tomás Silva in Peru

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Tomás Silva joined the Diagonal Investment Office team in Peru, coming from the funds section of SURA.

“The Diagonal team continues to grow with the addition of Tomás Silva as Head of Portfolio Construction and member of the investment committee!” the firm announced on its LinkedIn account.

Silva arrives at Diagonal with over 25 years of experience in the global capital markets. For the last 9 years, he worked at SURA, one of the largest financial groups in Latin America, as Senior Vice President of Fund Selection and Managers and Head of the Alternative Asset Funds of Funds Platform for SURA Investments at the regional level, and Investment Manager in Peru.

“I am very happy to take on this new challenge and work with the best specialists in the global capital markets to advise families in achieving their financial goals. Diagonal Investment Office’s capabilities, combined with the infrastructure and support of Sanctuary Wealth, make our proposition unique in the country,” commented the new hire.

His extensive career also includes positions at Santander (1995-1998), Norinvest (1998-2000), and Grupo Privado de Inversión (2004-2015), according to his LinkedIn profile.

“We continue to consolidate ourselves in the market as one of the American multi-family offices focused on Latin American clients that is attracting the most talent and experience. Bringing in people of Tomás’s caliber is not easy and can only be achieved if what we are doing is something significant. The combination of Diagonal Investment Office and Sanctuary Wealth, our strategic partner with over 42 billion dollars in AUM, allows us to offer our clients a unique model,” commented Rodolfo Rake, Managing Partner and Co-Founder of Diagonal Investment Office.

Additionally, Santiago Rey, Co-Founder and Managing Partner, based in Peru, highlighted Silva’s capabilities in portfolio construction.

“A star to reinforce the team and continue growing well: with optimal, well-managed portfolios and first-class service for our clients,” Rey posted.

Increasing the Appeal of British Equities: One of the Challenges for Labour as They Return to Power

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As the polls predicted, and pending the official results, the leader of the Labour Party, Keir Starmer, has won a landslide victory in the UK elections, ousting the Conservative Party after 14 years in power. According to early analyses from international managers, this victory brings clarity and stability to the markets, but Starmer will need to implement significant reforms, control inflation, and earn investors’ trust.

Rishi Sunak’s decision to call an early election has not paid off, leading to his resignation as the Conservative Party leader. Sir Keir Starmer is set to become Prime Minister. “Stock markets might have been alarmed at another time by a Labour government. However, there are two reasons why things are different this time: the party itself has significantly moved towards the center of the political spectrum, as indicated by its policy statements and manifesto; and secondly, investment markets have power over governments reliant on bond market funding. If Labour decided to further increase the UK’s budget deficit, a similar reaction in the bond market would likely occur,” points out Simon Gergel, Chief Investment Officer for UK Equities at Allianz Global Investors (AllianzGI).

PIMCO explains that the election outcome could affect the economy in two key areas: influencing economic demand through fiscal policies and enhancing long-term growth via supply-side policies. Peder Beck-Friis, an economist at PIMCO, notes that markets haven’t reacted much to this Labour victory, but they remain focused on growth, inflation, and monetary policy.

“Although the UK’s headline inflation has returned to its 2% annual target, core inflation remains high at 3.5% annually. We expect core inflation to continue falling as inflation expectations are anchored, the labor market has gradually relaxed, and fiscal policy remains tight. We also anticipate the Bank of England to start cutting rates soon, possibly in the upcoming August meeting. Looking ahead, financial markets expect rate cuts in line with the US Federal Reserve. However, we see the possibility of faster cuts in the UK due to low growth and strict fiscal policies,” says Beck-Friis.

Increasing the Appeal of Equities

For Ben Ritchie, Head of Developed Market Equities at abrdn, one of the new government’s main priorities should be increasing the appeal of British equities for domestic and international investors. “One of the quickest and most effective ways to achieve this is by removing the stamp duty on British stocks, making the UK more competitive, rewarding savers, and attracting much-needed foreign investment,” he notes.

According to Ritchie, Labour’s pro-growth agenda is key to generating the tax revenue needed to fund public services, with private capital playing a vital role in supporting investment. “If the new government gets it right, the companies most exposed to the British economy will benefit, boosting morale for companies in the FTSE 250 and FTSE Small Cap. With a little more patience, investors could finally be rewarded,” he adds.

Matthew Beesley, CEO of Jupiter AM, states that the British market has solid underlying fundamentals and is trading near historic highs. However, at the same time, valuations of British stocks are at historic lows due to political uncertainty in recent years. “There are many reasons to expect the new government to initiate a period of political stability, prioritize the Edinburgh reforms, and take responsibility for a clear industrial growth strategy that consolidates the UK’s recovery and makes it a key focus for international investors again,” he says.

Mark Nash, Huw Davies, and James Novotny, investment managers in the Absolute Return Fixed Income team at Jupiter AM, believe that Labour will have to convince both the market and the electorate that they are fiscally prudent while improving the poor state of British public services and the anemic productivity and growth profile, which they warn “won’t be easy.”

What to Expect from Gilts

For Jupiter AM managers, growth will be their “get-out-of-jail card,” easy to say but hard to deliver. “They are likely to place their hopes on a better trade deal with the EU to reduce border frictions and also on the liberalization of UK planning laws. If successful, this could rekindle hopes for greater growth in the UK and less inflationary pressure. Despite the UK’s fiscal position, we believe gilt yields seem cheap compared to other countries with weak fiscal positions (e.g., France), so it is very likely that there will be some flows into gilts from other troubled sovereign bond markets now that our elections are over,” they argue.

They also note that “Labour’s victory means we have entered a period of relative stability in British politics. The UK could well appear as a haven of political stability, a landscape very different from the years following the Brexit referendum.”

Gordon Shannon, manager at TwentyFour AM (a Vontobel boutique), adds: “British treasury bonds, gilts, remain almost unchanged across the curve today, demonstrating that Labour’s landslide victory was well anticipated. From a fixed-income market perspective, Labour’s fiscal and spending policies equate to the status quo, so we do not expect any internally generated political volatility this year. Instead, the market will continue to focus on the inflation path and interest rates.”

As PIMCO’s economist points out, the forecast is for the Bank of England to cut rates. Therefore, Beck-Friis believes that gilts are currently trading at attractive levels, “especially compared to US Treasuries.” He adds, “Across the curve, we still believe that intermediate rates are the sweet spot for taking positions in interest rates.”

Impact on Industry

Lastly, from abrdn, Christian Pittard, Head of Closed-End Funds and Corporate Finance Director at the manager, reminds that the new government must “urgently” consider fixing the cost disclosure rules that are hindering the closed-end fund sector in the UK.

“There is nothing to lose and much to gain, at zero cost to the public treasury, while boosting investor confidence and investment in the UK. Closed-end funds are an essential source of capital for major real estate, specialized equity, infrastructure, and renewable energy projects, which, according to political consensus, are necessary to drive the country’s growth,” he points out.

According to Pittard, the “misleading and unhelpful” cost disclosure rules for investment funds are “strangling investment” in these productive areas and must be addressed immediately. “Reforming the UK’s capital markets cannot be done without solving this puzzle, given that the sector represents around 36% of the FTSE 250, according to the London Stock Exchange,” he adds.

From abrdn’s perspective, this reform must go further and promote a national culture of saving and investing that brings even more capital to grow our economic pie. “The stamp duty on British stocks and UK-domiciled investment funds has distorted capital flows, putting the UK at a competitive disadvantage compared to its international peers and further hindering economic growth. By cutting this unfair and distorting tax, the new government could make significant strides towards creating the healthy and competitive investment environment the country so desperately needs,” concludes Pittard.