The Federal Reserve Federal Open Market Committee (FOMC) announcement marked the first of four significant central bank meetings that take place over the next several days, and perhaps not surprisingly the theme of global policy divergence is again on the table, says Rick Rieder, BlackRock ‘s Chief Investment Officer of Global Fixed Income. “That’s not because the Fed’s statement was excessively hawkish, although it was mildly so, but rather because the Fed both continues to recognize that U.S. economic data remains stronger than that seen in much of the rest of the world and as stated that “near-term risks to the economic outlook have diminished.” Further, extraordinarily easy financial conditions across the globe are stabilizing regions (Europe and emerging markets, for instance) that had experienced some significant stresses in the year’s first half, which in turn reduces the left-tail risks for U.S. growth prospects. That has allowed the Fed to continue its “wait-and-see” approach, which also seems calibrated to leave the door open to some small degree of interest rate policy normalization this year, including possibly in September. Of course, the pace of that change has been profoundly altered since the December 2015 meeting rate hike.”
Still, in his view, the utility of extraordinarily low interest rate levels has long since passed much effectiveness in stimulating real economic growth and for some time now has solely been influencing the financial economy as a price-supporting mechanism. “Thus, as we have long argued, the baton must now be transferred from monetary authorities to the fiscal channel, if we are to see any meaningful re-rating of economic growth in the U.S., and further stabilization of global growth as well. Of course, the possibility of future fiscal policy support, and even the continuation of extraordinary monetary policy, both have political elements to them, and the degree to which the asset inflation of recent years has left the middle classes behind, relatively speaking, could influence the policy path forward via the ballot box.”
He goes on saying that fascinatingly, they think the seeds of further political volatility will continue to be with us, as labor and income dynamics get more difficult at the margin in many parts of the globe. In fact, according to some market analysts, it is historically speaking not unusual to see a delayed political reaction that results from major financial crises, such as that seen in 2008, “so the rise in populist sentiment (for example, with the Brexit vote in the U.K., and political campaigns in the U.S.) should not be a surprise,” he states, adding that this very real discontent is largely the result of an uneven recovery. “So, almost regardless of where an investor is located around the world, political event risk is vital to keep a close eye on, even if estimating that risk has become very difficult of late.” Of course, in addition to the U.S. elections on November 8, we would particularly take note of the Italian constitutional reform referendum that is scheduled to also take place later this year, as well as the next German federal elections in late-summer 2017.
“We think much more interest rate policy normalization this year may be difficult for the Fed to accomplish, particularly should jobs growth continue on its slowing trend, inflation expectations and realized inflation remain fairly moderate, and both domestic and international political risks continue to unsettle financial markets. Thus, unless we see a significant improvement in economic data, further stability in global financial markets, and a meaningful pickup in inflation measures, we are likely to see only one more rate hike this year, with the year’s last third as the most likely time for it.” He concludes.
Foto: Jakob Montrasio
. Los compradores chinos lideran las adquisiciones internacionales de real estate en Estados Unidos
Waning economic growth in many countries and higher home prices further enhanced by a strengthening U.S. dollar resulted in a slight decline in international sales dollar volume of U.S. property over the past year and a significant retreat in buying from non-resident foreigners.
This is according to an annual survey of residential purchases from international buyers released recently by the National Association of Realtors. The survey also amazingly revealed that the dollar volume of sales from Chinese buyers exceeded the total dollar sales figure of the next top four ranked countries combined.
NAR’s 2016 Profile of International Activity in U.S. Residential Real Estate, covering U.S. residential real estate sales to international clients between April 2015 and March 2016, found that foreign buyers purchased $102.6 billion of residential property, a 1.3 percent decline from the $103.9 billion of property purchased in last year’s survey. Overall, a total of 214,885 U.S. residential properties were bought by foreign buyers (up 2.8 percent), and properties were typically valued higher ($277,380) compared to the median price of all U.S. existing home sales ($223,058).
Lawrence Yun, NAR chief economist, says this year’s findings highlight the tremendous appeal U.S. real estate still has on many foreign nationals despite the price of property becoming less affordable. “Weaker economic growth throughout the world, devalued foreign currencies and financial market turbulence combined to present significant challenges for foreign buyers over the past year,” he said. “While these obstacles led to a cool down in sales from non-resident foreign buyers, the purchases by recent immigrant foreigners rose, resulting in the overall sales dollar volume still being the second highest since 2009.”2
Adds Yun, “Foreigners – especially those from China – continue to see the U.S. as a solid investment opportunity and an attractive place to visit and live.”
According to the survey, sales to non-resident foreign buyers pulled back by approximately $10 billion to the lowest dollar volume since 2013 ($35 billion). The decline was largely caused by the decrease in the share of non-resident foreign buyers to foreign residential buyers to 41 percent – down from the almost even split between the two in previous years (48 percent in 2015).
“Both the increase in U.S. home prices – up 6 percent in March 2016 compared to one year ago – and the depreciating value of foreign currencies against the U.S. dollar made buying property a lot pricier last year,” says Yun. “Led by Venezuela (45 percent) and Brazil (24 percent), at least eight countries, including China and Canada, saw double-digit percent increases in the median sales price of a U.S. existing-home when measured in their country’s currency.”
For the fourth year in a row, buyers from China exceeded all countries by dollar volume of salesat $27.3 billion, which was a slight decrease from last year’s survey ($28.6 billion) but over triple the total dollar volume of sales from Canadian buyers (ranked second at $8.9 billion). Chinese buyers purchased the most housing units for the second consecutive year (29,195; down from 34,327 in 2015), and also typically bought the most expensive homes at a median price of $542,084.
“Although China’s currency modestly weakened versus the U.S. dollar in the past year, it’s much stronger than it was 5 to 10 years ago, thereby making U.S. properties still appear reasonably affordable over a longer time span,” notes Yun.
In addition to the slightly diminished sales activity from Chinese buyers, the total number of sales and the sales dollar volume from buyers from Canada, India ($6.1 billion) and Mexico ($4.8 billion) also retracted from their levels one year ago. Only buyers from the United Kingdom – after a decrease in the 2015 survey – saw an uptick in total sales and dollar volume ($5.5 billion).
“Sales activity from U.K. buyers could very well subside over the next year depending on how severe the economic fallout is from Britain’s decision to leave the European Union,” adds Yun. “However, with economic instability and political turmoil outside of the U.S. likely to persist, the world view of American real estate as a safe investment should keep demand firm even as pressures from a stronger dollar continue to weigh down on affordability.”
CC-BY-SA-2.0, FlickrArriba, de izda. a dcha.: Kevin S. Kosmak, Scott Sandee, Kelly Demers, Daniel D. Abbatacola y Joseph R. Schwall, de la oficina de Chicago - Abajo de izda. a dcha.: Thomas Dicker y Marleny Cheshier - Fotos cedidas. BNY Mellon Wealth Management nombra director para U.S. Markets, e incorpora a 6 profesionales en California y Chicago
BNY Mellon Wealth Management has named Thomas Dicker to be Head of U.S. Markets, based in Boston. In his new role Dicker will oversee the 38 wealth offices throughout the US reporting into Don Heberle, CEO of BNY Mellon Wealth Management.
Dicker, who most recently served as the firm’s Chief Operating Officer, is responsible for driving growth and delivering a superior client experience across the firm’s regional markets and has held several other key leadership positions and client-facing roles during his 29 years with BNY Mellon including overseeing the acquisition of the firm’s offices in Toronto, Chicago, and Menlo Park.
California
The firm has also hired Marleny Cheshier as a senior wealth manager in its Newport Beach wealth management office. Cheshier reports to Michael Silane, senior director of portfolio management. The Newport Beach office has experienced strong growth serving high net worth clients in Orange County and the broader Southern California market. Prior to joining BNY Mellon, Cheshier was at Northern Trust for 18 years, where she most recently served as a vice president and senior portfolio manager.
Five additional staff in Chicago
BNY Mellon has also hired Kevin S. Kosmak for a newly created team leader and senior wealth manager role and named Scott Sandee as senior wealth director. The firm also appointed Kelly Demers as vice president and residential mortgage banker. It named Daniel D. Abbatacola as underwriter in life insurance premium lending, and Joseph R. Schwall as senior private banker.
The additions to the Chicago office are part of the firm’s strategic hiring initiative in important wealth markets and bring the total size of the Chicago office to 35 professionals, an increase of 350% since BNY Mellon opened its doors there in 2010.
“BNY Mellon Wealth Management’s growth strategy here in Chicago and across the country is to continue to recruit and develop the best talent in the industry. We’re delighted to welcome Kevin, Scott, Kelly, Dan and Joe to our expanding Chicago office,” said Michael DiMedio, Chicago regional president. “They join a team that offers BNY Mellon’s exceptional wealth management services to our ever-expanding client base.”
Kosmak and Sandee report to DiMedio, while Demers reports to Managing Director Erin Gorman. Schwall reports to Regional Director William McKinley and Abbatacola reports to Rebecca Ryan, head of private bank life insurance lending.
Kosmak comes to BNY Mellon from Northern Trust, where he served for more than 13 years and was a senior portfolio manager and team leader. He holds a bachelor’s degree in business with a concentration in finance and a bachelor’s in accounting from the University of North Texas. He has a master’s in business administration with a concentration in financial analysis from DePaul University. He is a member of the board of the St. Edward School in Chicago, and is active with the Skokie Amateur Hockey Association.
Sandee was previously employed as a private wealth advisor for BMO Private Bank and, before that, as a wealth strategist with Northern Trust. He holds a bachelor’s degree from Northern Illinois University in DeKalb, Ill., and is a resident of Wilmette, Ill.
Demers joins BNY Mellon from JP Morgan Chase where she was a private client mortgage banker. She has nine years of financial services experience and a bachelor’s degree with a concentration in mathematics from the United States Military Academy at West Point, N.Y. She is a member of the board for the West Point Society of Chicago, the National Louis University Veteran’s committee and IL State Treasurer’s Veteran’s Advisory Committee.
Prior to joining BNY Mellon, Abbatacola was employed as a senior underwriter with Northern Trust. Earlier he was with Cornerstone National Bank and Trust Company. He holds a bachelor’s degree with a concentration in finance from Northern Illinois University, and resides in Plainfield, Ill.
Schwall joins BNY Mellon from Northern Trust, where he held several key positions over his 27 years there. He earned a bachelor’s degree in economics from the University of Illinois at Urbana-Champaign and is an active member of the Juvenile Diabetes Research Foundation and the Have Dreams autism awareness organization.
Foto: id
. BMO Global Asset Management lanza el fondo Global Absolute Return Bond
BMO Global Asset Management has launched the BMO Global Absolute Return Bond fund further strengthening its absolute return offering for retail and institutional investors looking for attractive levels of potential return in today’s low-yield environment. The fund is a UCITS SICAV domiciled in Luxembourg and the Financial Conduct Authority recognizes it. It is a liquid investment strategy with daily dealing available.
BMO Global Absolute Return Bond fund’s investment approach is unconstrained by a benchmark or particular maturity, credit rating band, sector or geography, but has strict risk limits. A long bias, combined with the ability to goshort rates and credit, gives greater flexibility and downside protection.
Investment in global credit is combined with thematic overlays within the portfolio to provide diverse sources of return within a disciplined risk management framework. The core credit portfolio is a ‘buy and maintain’ strategy which focuses on exploiting persistent anomalies in investment grade and high yield securities and is well diversified with over 100 issuers to reduce risk. Thematic overlays contribute to return and aid diversification through active management of credit, interest rate and currency risk. Disciplined risk management is used across the portfolio to calibrate risk up or down as necessary.
BMO Global Asset Management’s Fixed Income team in London manages the fund. The lead managers are Keith Patton and Ian Robinson. Strategic decisions across each of the underlying strategies are delegated to experts in global credit, currency, rates and risk management.
“The fund aims to deliver stable returns whilst having a different profile to that of global bond markets,” said Keith Patton, co-manager of the BMO Global Absolute Return Bond fund. “The combination of multiple strategies, working together, provides investors with the opportunity for a smoother overall return profile over time relative to traditional investments. In addition, the unconstrained approach allows for greater diversification across strategies and for the investment teams to target areas where they have the greatest conviction.”
Ian Robinson, co-manager of the BMO Global Absolute Return Bond fund, added: “The focus on shorter dated credit securities reduces the cyclicality generally associated with longer maturity bonds.”
The launch is part of the continued drive to build BMO Global Asset Management’s offering to, and coverage of, wholesale and institutional clients across EMEA over the past year.
“We are seeing huge demand from our clients for absolute return strategies, as they look for solutions that can provide greater certainty of outcome and positive returns in a challenging market environment,” said Mandy Mannix, Head of Client Management, BMO Global Asset Management (EMEA).
Take-up of foreign investment funds has trumped the lackluster mutual fund industry growth in Southeast Asia in 2015, Cerulli Associates found in its recently released report Asset Management in Southeast Asia 2016.
While year-on-year growth of mutual fund assets under management declined from 21.2% in 2012 to 6.4% in 2015, foreign equity fund assets in Thailand surged from THB111.1 billion (US$3.1 billion) in 2014 to THB226.2 billion in 2015. In Malaysia, wholesale feeder assets nearly quadrupled from MYR812.5 million (US$188.8 million) in 2014 to MYR3.1 billion in 2015, and private unit trust foreign exposure increased from 14.9% to 16.8% over the same period.
“Despite these spectacular growth rates, assets of foreign-invested feeders in Thailand and Malaysia have largely been concentrated in the hands of the larger players or among the few biggest funds,” said Manuelita Contreras, an associate director at Cerulli in Singapore. The US$1.5 billion feeder fund assets managed by J.P. Morgan Asset Management in Thailand and Malaysia, for example, mainly came from four of its funds: JPMorgan Global Healthcare Fund, JPMorgan Global Income Fund, JPMorgan ASEAN Equity Fund, and JPMorgan Asia Pacific Income Fund.
Meanwhile, in the Philippines, no less than 13 foreign-invested feeder funds and two funds of funds were launched as of end-2015 since feeder fund unit investment trust funds were first introduced in late 2013, while at least four Indonesian managers have launched foreign-invested Shariah-compliant funds as of April 2016.
“For foreign managers looking to engage third-party fund distributors in Southeast Asia, a long-term track record and global brand recognition will come in handy, though we understand that Thai managers are also open to appointing less well-known managers,” said Contreras. Southeast Asian managers also generally prefer to work with fund managers with an Asian presence and a shorter turnaround time.
Negative interest rates– though unsettling for many – can actually be an economic boon, according to a new study by National Center for Policy Analysis(NCPA) Senior Fellow David Ranson.
“Low interest rates are not in themselves bad for the economy. Indeed, the same can be said of high interest rates; financial markets cannot operate efficiently unless rates are in line with expected inflation and, at times, deflation,” says Ranson.
The study points to Switzerland as an example of naturally negative interest rates. “To their own surprise, the Swiss accomplished it by maintaining an exceptionally strong currency, now roughly at par with the dollar. Life went on,” writes Ranson. “The Swiss currency has long been one of the strongest anywhere, and inflation has been low and sometimes negative for years. It is negative right now, but it is mostly market forces that drove Swiss nominal interest rates below zero. Indeed, in these hitherto rare cases where prices are consistently on the decline, it is natural for nominal rates to be negative.”
While there are mental, cultural and institutional barriers to negative interest rates, there are no economic barriers to negative interest rates, adds Ranson. “However inconsistent it may seem at first, there is no inherent conflict between opposing the Fed’s former zero interest-rate policy and cautiously welcoming negative interest rates, in the event that deflationary conditions last.”
CC-BY-SA-2.0, FlickrFoto: Investopedia. ¿Qué debe hacer un centro financiero para evitar ser percibido como un paraíso fiscal?
What should a financial centre in danger of being perceived as a ‘tax haven’ do to manage the outpouring of potentially damaging headlines? The Global Financial Centres Index (GFCI) indicates that the ratings of these centres tend to rely largely on the perceptions of people involved in financial services. These perceptions are affected by press coverage and the work of the Organization for Economic Co-operation and Development (OECD) and other international bodies.
In GFCI 19, published in March 2016, the Caribbean centres of the British Virgin Islands, the Cayman Islands, Bermuda and the Bahamas all suffered significant declines in their ratings with Panama showing a larger decline than any of them. The British Crown dependencies of the Isle of Man and the Bailiwicks of Jersey and Guernsey had a similar experience with Gibraltar, Malta, Monaco and Liechtenstein completing the picture with downgrades of their own. Looking back over the last three years, almost without exception, all of the Caribbean centres and the Crown dependencies have moved in the same direction in the GFCI – moving up together and down together clearly affected by the feelings and perceptions of the industry at the time of the survey.
If this were not unfortunate enough, the recent scandal has undoubtedly led to the deepening of these negative perceptions. In the light of the recent adverse publicity as a result of the ‘Panama paper’ leaks, what should a financial centre, which is likely to be drawn into the debacle do? For Trinidad and Tobago, there are three obvious options:
Lie Low and stay under the radar – it is likely that many centres will decide that in the face of such a media storm, it is best to lie low and stay out of the news as much as possible. This is perhaps understandable and may be a viable short term strategy.
Protest – several centres proclaim their innocence. In the current climate these protests of “it’s not us!” do not gain much sympathy. Several of the centres protesting the loudest do not deserve much sympathy!
Differentiate – a valid longer term strategy is to become a different type of financial centre. Encourage finance for good purposes and make it much harder for money launderers and tax evaders to operate in your territory so that when the next wave of bad publicity arrives (as it surely must), you can genuinely hold up your hand and claim that you are different.
The newly formed financial centre of Trinidad and Tobago is being developed using global standards and best practices and will have a modern, principle based regulatory framework which will be supported by enforcement action against firms that breach the legislation and regulations. This model has already been used to successfully establish the Dubai International Financial Centre. The legislation for the Trinidad and Tobago IFC has been drafted and is awaiting approval by legislators.
On July 15th 2016, a fraction of the Army mostly medium rank officers, had undertaken a coup attempt and seized airports, bridges, TV stations and military headquarters, before attacking the Turkish parliament, leaving the building charred and damaged, and have reasoned to seize power to protect the democracy from the Government.
A number of government officials, including President Erdogan and Prime Minister Yildirim, spoke to the media through FaceTime, saying the coup attempt was staged by military officers that are affiliated with Gulen movement. Prime Minister Binali Yildirim and Erdogan named the attempt as ‘uprising’ and perceived it as an attack to democracy.
Erdogan and the mosques called people to take to the streets and stand against the coup. People reacted strongly and took over the streets. Within a couple hours police forces took control and restored the order in most places. People walked on top of tanks and chanted against the coup. Also, several high rank military officers from different parts of Turkey strongly expressed their opposition against the coup and sided with the government.
The government and Erdogan claimed that Gulen movement to be responsible from the failed coup attempt, while Gulen movement rejects this claim and indicates they don’t even know the army forces who had undertaken the attempt, while also condemned the coup. The claim is that there will be High Military Council meeting during August 1-4, in which President Erdogan is expected to expel a group Gulen supporters from the Army.
On Saturday, July 16th the Parliament convened with an extraordinary meeting and all the members of parliament from the secular/social-democrat CHP (Cumhuriyet Halk Partisi), nationalist MHP (Milliyetci Hareket Partisi) and left-wing HDP (Halklarin Demokratik Partisi) opposed the coup attempt, and there were no one who supported.
Sadly, 200 people were dead and more than 1,500 wounded in the aftermath of the failed coup attempt and another crackdown on the group’s supporters has begun. More than 2,800 military personnel were arrested and more than 2,600 judges are laid-off and arrest orders for 140 Council of State members, more than 48 High Court of Appeals members and five HSYK (High Council of Judges and Prosecutors) members are released.
As expected, President Erdogan calls US to extradite Fethullah Gulen again while US officials requested for solid evidence that Gulen is involved in the coup attempt.
What could be the consequences? The unsuccessful coup attempt will make President Erdogan more powerful now and Turkey is closer to presidential system. There are still question marks whether there will be early elections but the possibility increased significantly. AKP (Adalet ve Kalkinma Partisi – Party for Justice and Development) supporters were on streets throughout the weekend and it looks like the unsuccessful coup attempt would increase AKP’s popular support, which may also trigger the early election possibilities.
On the macro side, the failed coup attempt may have negative impacts on consumption and investment appetite and the struggling tourism sector probably will take another hit. After hitting above 3.0 levels against US Dollar, the Turkish Lira recovered of some of its losses during the weekend.
Deputy Prime Minister Simsek and the CBT (Central Bank of Turkey) Governor Murat Cetinkaya made conference call with the investors on Sunday evening and indicated that the Government has room in the budget and they don’t think there will be permanent negative consequences on the growth of the economy. The CBT also provided some measures to be taken to minimize the market impact. Accordingly, it was announced that the Central Bank will provide banks with needed liquidity without limits and the commission rate for the intraday liquidity facility will be zero. The bank further announced that market depth and prices will be closely monitored and all measures will be taken to ensure financial stability, if deemed necessary. The central bank is scheduled to hold a policy meeting on Tuesday, where the market expects no change in the policy rate.
Erdogan’s full stance and response when all the dust settles down will be more crucial than ever this time for the economy. In addition, the failed coup attempt showed that there cannot be a coup in Turkey anymore and paves away the concerns over any military intervention going forward.
Equity market impact looks inevitable at this stage with the political turmoil. Although the Deputy PM & CBT Governor made efforts to sustain confidence for the foreign investor community and the recovery in the TRY, equity market is likely to seen off to a negative opening.
CC-BY-SA-2.0, FlickrFoto: PublicDomainPictures / Pixabay. 2016, el año del oro
Financial markets are vulnerable to unpredictable events that shake the international geopolitical stage. The most recent example was the outcome of the UK referendum on European Union membership. As noted by the International Monetary Fund (IMF) in its Global Economic Prospects report, “the negotiations on post exit arrangements would likely be protracted, resulting in an extended period of heightened uncertainty that could weigh heavily on confidence and investment, all the while increacing financial market volatility.”
This and other political uncertainties in the developed world, such as the outcome of the US presidential elections or the fact that Spain has been unsuccesful in defining its government, result in the need for diversification of portfolios. That is, lay investor’s eggs in several baskets and favor safe-haven assets.
2016 is on track to be the year of gold. In the first three months of the year, gold increased in value by 22%, resulting in its best quarter in 30 years. During this period, deposits of listed products invested in this metal reached 22 billion. Just in the week following the UK’s referendum, investors allocated $2.5 billion to ETPs with Gold exposure. While European equities have had a negative year. The heightened noise we see in the markets is likely to continue so adding a hedge such as gold, could dampen volatility.
Beside the temporary circumstances, there are a number of structural factors ensuring gold’s long-term price stability, such as the proliferation of bonds with negative performance as well as the pace of the US interest rates.
One of the most relevant funds in this area is the BGF BlackRock World Gold Fund. In order to maximize the total profits of their investors, this fund invests more than 70% of its total assets in shares of companies around the world whose main activity is the extraction of gold. The fund may also invest in shares of companies whose predominant economic activity is the mining of other
CC-BY-SA-2.0, FlickrHSBC Private Bank nombra a Joe Abruzzo director del negocio de Norteamérica - Foto cedida. HSBC Private Bank nombra a Joe Abruzzo director del negocio de Norteamérica
HSBC Private Bank today announced the appointment of Joe Abruzzo as Business Head of North America.
In this role, Abruzzo will be responsible for driving and executing HSBC’s strategy for private banking across North America, particularly in the US, a key market for HSBC Global Private Bank. He will also serve as a member of the HSBC Global Private Bank Executive Committee.
Based in New York, Abruzzo will report to Marlon Young, Regional Head of Global Private Banking, US & Latin America.
“This is an exciting time for Joe to join the Private Bank,” said Young. “We’re growing our business in the US and as we look to build on this momentum, Joe’s deep commercial and investment banking experience will help us to further capitalize on our strategy to be the Private Bank of choice to the owners and principals of HSBC’s corporate clients.”
With over 30 years in banking, Abruzzo most recently served as HSBC’s Head of US Large Corporate Banking. He joined HSBC in 2014 as Head of Northeast Corporate Banking and in early 2015 was named Co-Head of US Corporate Banking. Before that, he spent 26 years with JP Morgan Chase in various senior leader roles in Commercial and Corporate and Investment Banking.
Young added, “We continue to invest in our people, products and services in the US and I’m also personally delighted that we are able to develop local US talent within HSBC.”
