Pixabay CC0 Public DomainOimheidi. After the Trade Storm of Summer, what do the Last Four Months of the Year Hold in Store?
All analysts point to several elements as the protagonists towards the end of the year: Geopolitical tensions in the face of a possible commercial war, rising interest rates on the horizon, the Brexit negotiations, and the confidence in fundamentals that suggest that Global growth will continue.
For some experts, such as Olaf van den Heuvel, Head of Investments at Aegon Asset Management, the markets are behaving well and will continue to do so for the rest of the year, despite the constant background noise generated by the economic situation, geopolitics and the associated volatility.
“As we anticipated, the most prominent feature so far in 2018 has been the reappearance of market volatility in most asset classes. Volatility is often synonymous with good news for active fund managers, as it allows us to provide added value through fundamental analysis and a good selection of securities. In addition, volatility has not prevented most economies from maintaining a steady growth rate. To date, the year has been marked by a continuous flow of events that have focused the attention of the markets at one time or another, from the abrupt stock market corrections to the widening of the Libor spreads, Italian politics, and the depreciation of emerging market currencies. Although these events caused strong fluctuations in the markets, within a matter of days they were already of secondary importance,” says Van den Heuvel.
According to this expert, it isn’t difficult to identify the events that will affect the markets in the coming months: “Trade policy has become a central issue and will continue to be so long as Donald Trump continues to apply tariffs on Chinese goods. The Chinese economy is already somewhat weakened in itself after the strong corrections experienced by both its currency and its stock markets. I think fears about the sustainability of the Chinese growth model will come to the fore some time during the year, as well as the possible repercussions of the agreement, or lack of agreement, on Brexit.”
At Lombard Odier they share the same theory, as they believe that “trade tensions will remain restrained, although we must admit that the possibility of a trade war has become a risk that deserves our utmost consideration.”
Regarding this summer period of tweets and tensions that we are just about to conclude, the team of economists at Schroders, are wondering as to just how real the “calm” we are experiencing really is. “Concerns about China, the weakening of commodity prices, and the appreciation of the dollar, all point to a period of slower growth for the global economy. The trade wars have probably generated a rebound and later a fall, as importers advanced their expenditure in order to avoid higher tariffs and now they are reducing it again”
Macro analysis
Looking at the fourth macro, at Lombard Odier they point out that the global environment does not favor the growth of emerging markets, “although the most affected countries to date have been those with weaker fundamentals or greater political risk.” For the United States, it foresees, in the short term, that the Fed will not accelerate the adjustment of its policies and that the economy of the Euro-zone will suffer specific falls, rather than sustained ones.
In this regard, Schroders points out that, unless trade wars hurt “business confidence and investment, the global economy should recover, but the combination of tariffs and tax cuts is likely to lead to an increase in inflation in the U.S”.
CC-BY-SA-2.0, FlickrJulieta Henke, courtesy photo. Julieta Henke Returns to Robeco in Charge Of the Retail Business in Argentina and Uruguay
Robeco has rehired Julieta Henke to cover the retail business in Uruguay and Argentina, plus some clients in Miami and Panama. She will report to Jimmy Ly, Head of Sales for Americas Offshore.
“We’re excited to have Julieta back with us to further enhance Robeco’s relationships in the region. She is an excellent addition to our team and I have no doubt she will be highly successful immediately.” Said Jimmy Ly.
She will be based out of Miami.
Back in December 2017 Henke joined the Pioneer Investments team in Argentina, as Country Manager. She has over 20 years experience in companies such as Robeco, Merrill Lynch International, and the Argentinean Central Bank. She is a CIMA charterholder.
CC-BY-SA-2.0, FlickrPhoto: Bill Benzon
. A Photo of the Empire State Building Can Get You 5,000 Dollars
Empire State Realty Trust is having its seventh annual photo contest for photographers to share their “Empire State Building (ESB) Moment” and get the chance to win $5,000. For the first time, the contest will be open to participants not only in the United States, but also in Canada, and the United Kingdom.
In addition to the Grand Prize, those who submit photos will compete to win one of the eight weekly prizes and a Runner-Up prize of $1,500. Winners will also have their work displayed in the new Empire State Building Observatory.
“A picture is worth 1,000 words, and what better way to share a special ‘ESB moment’ than through a photographic memory,” said Anthony E. Malkin, Chairman and CEO of ESRT. “We are excited to share unique, personal perspectives of ESB as seen through the eyes of our Guests, and to give our Guests a chance for their 15 minutes of fame through the display of their winning submissions in our new $160 million Observatory experience.”
Fans of the Empire State Building may submit their photo entry via Instagram or Twitter by using the hashtag #ESBmoment and #contest. Entrants may also submit their photos using ESB’s photo contest microsite www.esbphotocontest.com
Entries will be accepted through Friday, October 5, 2018, at 11:59 PM ET. Exterior and interior shots of the building will be accepted.
CC-BY-SA-2.0, FlickrPhoto: John Spade. 12 Florida RIAs Are Included in the Top 300 Ranking From The Financial Times
RIA growth in the United States can be considered unstoppable. Large financial advisors keep on adding both clients and their assets, reaching historical highs, according to the FT 300: Top Registered Investment Advisers 2018.
As the company states, “the growth of the large RIAs is visible in this fifth annual FT 300 Top Registered Investment Advisers list. The median FT 300 company manages $1.7bn in assets — compared with $1.2bn in last year’s list. RIAs with more than $1bn in assets under management (AUM) also increased, from 57 per cent of 2017’s crop to 74 per cent this year.”
In Florida 12 RIAs made the list. Amongst them are BigSur Partners, with Ignacio Pakciarz, as well as Santiago Ulloa and María Elena Lagomasino’s, WE Family Offices and the Boca Ratón RIA, Steinberg Global Asset Management.
The Millennial generation gets a lot of flak, but is it actually warranted? Often pegged as lazy and entitled, Millennials actually highly value hard work and education, surveys have shown. Unfortunately, hard work and education aren’t getting them as far as it did previous generations; Millennials face greater financial burdens with rising education costs, crippling student loan debt and stagnant wages. As the costs continue to soar and Millennials take on more debt, it’s little wonder that many of them experience financial anxiety. One study found that 74 percent of Millennials surveyed feel daily stress related to their student loan debt.
American Financial Benefits Center (AFBC), a document preparation company, recognizes that Millennials face tough financial challenges in today’s economy and reminds student borrowers that there may be options to help. “We hear all the time that it’s gotten harder to make ends meet,” said Sarah Molina, manager at AFBC. “When you look at the statistics, it becomes clear that this isn’t an exaggeration.”
Higher education has become increasingly expensive; since 1980, tuition has risen nearly 260 percent. The rising costs and loan interest have made it more difficult for Millennial borrowers to pay off student debt than it was for previous generations. Baby Boomers, for example, would have had to work 306 hours at a minimum wage job, adjusted for inflation, to pay for four years at a public college; Millennials have to work an average of 4,459 hours in comparison. Millennials also have 300 percent more debt than their parents, the majority of which consists of student loans. Many Millennials with student debt have a net worth of -$1,900; they owe more than they own. In addition to shouldering monumental student loan debt, they face other financial challenges with increases in housing and medical costs, as well as lower wages.
“It’s easy to take on student debt without realizing how much it will impact you later,” said Molina. “After graduation, the reality of having to pay off the debt sinks in and many young people feel overwhelmed trying to balance loan payments with other expenses.”
According to a study conducted by Northwestern Mutual, approximately one-quarter of Millennials say that their financial anxiety affects their job and makes them feel physically ill, compared to 12 percent of Boomers or Gen Xers. A quarter of them also said that it affects their relationship with their significant other and causes them to miss social opportunities. Furthermore, 18 percent of Millennials said their financial anxiety caused them to feel depressed on a weekly basis. Adding to the stress, many Millennials don’t know the details of their loans or even how long it will take to pay off their debt. For Millennials with federal student loan debt, income-driven repayment plans (IDRs) may be a helpful option to reduce some of the financial stress. By taking into account a borrower’s family size and monthly discretionary income, loan payments can be recalculated to what should hopefully be a more manageable amount.
“We feel young people should be able to have options for paying off their loans so their financial anxiety can be lessened,” stated Molina.
Pixabay CC0 Public DomainWenPhotos. Are we Heading Towards a Political Crisis in the Eurozone with Italy?
The risk of a new sovereign crisis in the Eurozone seems to have come to a halt after the uncertainty caused by the Italian elections and the subsequent formation of a populist government. At the end of the second quarter, Italy became the center of attention and the fear of contagion resurfaced again. Will Italy – and the rest of the peripheral markets – endure the political noise? Noise such as that caused by the Italian Deputy Prime Minister and leader of the 5 Star Movement, Luigi Di Maio, when he affirmed that the government would not ratify the free-trade agreement between the EU and Canada (CETA). These types of statements generate uncertainty in the market and concern for international investors, as what happened with Greece during the economic crisis still remains fresh in their memory.
This is where asset management companies reassure and argue that we are not facing the same case. “As simple as the idea that we are facing a Greece II may be, there are several factors that override this perspective. On the one hand, the Italian economy is much larger: it represents approximately 15% of the economic activity registered in the Eurozone, compared to 1.6% for Greece, and traditionally, its economy and banking system are considered much more integrated with the rest of the Eurozone. Italy is also the third largest debtor in the world (130% of its GDP), after the United States and Japan. In addition, according to the figures handled by Deutsche Bank, only 40% of this debt has domestic creditors: foreign investors (around 35%) and the Euro system (approximately 18%) account for the majority,” Robeco sources explain.
Likewise, they consider that the contagion to other countries, especially the peripheral ones such as Spain or Portugal, is low. According to Oliver Marcoit and Guilhem Savry, Managers of Multiactive Strategies at Unigestion, contagion is very limited given the consolidation that exists in the Eurozone since the European debt crisis.
Spain has its own problems, however, and the vote of no confidence that took place in June revived market tensions, since the markets are taking into account the risk that populist parties will gain access to executive functions. The combination of political risk in both Italy and Spain would weigh on European assets as a whole, with the spreads of the peripheral government and the Euro at the forefront,” warn Marcoit and Savry.
Italian Risks
That the risk of contagion is low, or that Italy’s context is totally different from what Greece was, does not exempt it from having a long list of tasks ahead to avoid weakening the European project. According to Philipp Vorndran, Market Strategist at Flossbach von Storch, Italy is at a moment of transition and exposes its public coffers to a new challenge, which will only be viable if interest rates are maintained at the current level.
In fact, the “Government for change” proposed by Italian Prime Minister Giuseppe Conte is a challenge for the public coffers and may lead to a greater imbalance than expected. According to a study by Flossbach von Storch’s Research Institute, the net negative fiscal impact of the proposed measures could reach 100 billion Euros per year. Amongst the proposed measures are the reduction of fuel taxes, the repeal of the recent pension reform, and the creation of an income for citizens living below the poverty line. Minister Conte’s plan, however, does not clarify how he plans to finance these and other measures. On the one hand, VAT remains unchanged. On the other hand, the reduction of expenses, such as the abolition of “golden pensions”, limitations on international missions, and the elimination of the life pension for members of parliament, does not release enough capital to finance the measures provided for in the coalition agreement. According to this study, the financial hole in public coffers could reach 120 billion Euros.
According to Vorndran, it also seems unlikely that these measures will significantly boost economic growth and improve the trade balance. “Half of the proposed measures would have a negative impact, going from the current 132% today to 141% of the GDP until the end of the mandate. As long as Italy’s economy maintains the growth rate of the last five years and the ECB extends its favorable monetary policy for the refinancing of costs,” he says.
CC-BY-SA-2.0, FlickrPhoto: Principles.com. Ray Dalio to Release New Book on the 10th Anniversary of the 2008 Financial Crisis
Ten years ago, a financial crisis shook the world. Few saw it coming and fewer were prepared to deal with its repercussions. On the eve of the anniversary of the 2008 financial crisis, Ray Dalio, one of the world’s most successful investors and entrepreneurs, will reveal his and his firm Bridgewater Associates’ extensive research on debt crises in a new book, A Template for Understanding Big Debt Crises. To be released on September 10th, 2018, the book will detail Dalio’s in-depth study of how debt crises have operated throughout history, which allowed him and Bridgewater Associates to anticipate and successfully navigate the financial crisis ten years ago.
Dalio is the founder, co-Chief Investment Officer and co-Chairman of Bridgewater Associates, which he founded in 1975 out of his two-bedroom apartment in New York and has since grown into the largest hedge fund in the world and the fifth most important private company in the U.S., according to Fortune. Dalio has a unique way of studying and understanding the world, which allows him to see economic events differently than the consensus and foresee coming developments that are often under-recognized and overlooked.
As explained in his New York Times #1 Bestseller Principles: Life & Work, one of Dalio’s core beliefs is that most everything happens over and over again through time, so that by studying the patterns, one can understand the cause-effect relationships behind them and develop principles for dealing with them well. In this three-part research series, he does that for big debt crises and shares his template in the hopes of reducing the chances of big debt crises happening and helping them be better managed in the future.
“At this stage in my life I want to pass along the principles that helped me and can help others,” said Dalio, adding: “Since debt crises cause some of the worst human suffering, passing along this template for understanding and dealing with them on the 10th anniversary of the 2008 financial crisis seemed like an appropriate thing to do.”
The book comes in three parts: The Archetypal Big Debt Cycle – Dalio’s and Bridgewater Associates’ outline of the major components of debt crises and how they operate Three Detailed Case Studies – In-depth experiences of debt crises throughout history including the 2008 financial crisis, the Great Depression and the 1920s crisis in Weimar Germany Compendium of 48 Cases – A compendium of charts and computer-generated text summaries showing how the template applies to several dozen other historical debt crises
The book will be available online on September 10th, 2018. Interested readers will have the choice between a free PDF version and a Kindle version, available through Amazon, for $14.99. A print version of the book will be available in mid-October for $50.00.
For more information on book and how to preorder it, please visit Principles.com.
Foto cedida. Should Investors be Worried About EM Contagion?
Emerging markets are in free fall. The main reasons for the decline are the recent US dollar strength, trade war fears, and, more recently, the sharp devaluation of the Turkish lira. The abrupt sell-off evokes memories of the Mexican peso crisis of 1994/1995, the Asian financial crisis of 1997/1998, and, more recently, the Chinese devaluation and stock market turbulence of 2015/2016. Should investors be worried about emerging market contagion?
The crisis in Turkey is hardly surprising. Its economy suffers from a large trade deficit (6.3% of GDP), high external funding needs, and rising inflationary pressures. Consumer price inflation surged from around 10% at the beginning of the year to above 15% by June. Nevertheless, the central bank left the policy rate unchanged at 17.75% at its July policy meeting. It became evident that President Erdogan’s criticism of higher interest rates has undermined central bank independence. This opened the door for bets against the lira. There is hope that a more comprehensive policy, combined with fiscal and monetary austerity, could stabilize the currency and avoid an inflationary spiral, although this could push the economy into a recession in 2019. The good news is that there are only minor economic links between Turkey and other emerging markets.
More importantly, Turkey’s major emerging market peers are in better shape. Fundamentals are healthy, with improved trade and fiscal accounts and low inflation. Foreign debt levels are not excessive and a number of major countries, especially China, have sizeable hard currency reserves in place. Demographic factors also continue to be favorable in comparison with advanced economies. Finally, there is a tendency toward structural reforms, stronger institutions, and anti-corruption policies that should improve longer-term financial stability. For now it appears that China and Brazil are the only countries that could trigger a deeper financial crisis, due to their size and rising sovereign-debt (Brazil) and corporate-debt (China) levels.
Brazil has initiated an ambitious reform process. The country is at an early stage of an economic recovery following the sharp recession of 2015/2016, since when the trade deficit has been largely eliminated. Inflation and interest rates are low in comparison to what they have been. This, together with significant hard currency reserves and a direct swap line with the US Federal Reserve, gives the central bank plenty of room to counterbalance pressures and defend the foreign exchange rate. The problem is that Brazil needs economic growth to offset its souring public debt levels, meaning that the reform path needs to be continued. Volatility is therefore likely to persist ahead of the upcoming presidential election in October. However, given the illegibility of former president Lula, the most likely outcome is still a relatively market-friendly, though populistic, center-right government, which could lead to a relief rally.
China has started to transform and modernize its economy and this should lead to more sustainable and robust, albeit somewhat slower, economic growth. Policy measures in the past two years have included a reduction of fiscal and monetary stimulus to deflate the housing bubble and reduce local and corporate debt levels. Economic growth has continued to slow at a moderate pace, from above 7% to around 6.5%. The recent depreciation of the yuan is no great surprise, given the general US dollar strength as well as the narrowing growth, trade deficit, and interest-rate gaps compared to the US. Of course, the main risk is an escalating trade war. Given President Trump´s rising approval ratings and recent political scandals around his lawyer and campaign manager, he may continue to play tough to please his main supporters. Trade tensions could therefore intensify ahead of the US mid-term elections in November. However, China has already started to implement small policy adjustments to bolster the economy’s defenses against the negative impact of US tariffs, which should start to become visible in Q4. Even if the US imposes a 25% tariff on another USD250bn of Chinese goods, the growth drag should be less than 1% and an additional stimulus should help keep GDP growth above 6% in 2019. In a more market-friendly scenario, Trump’s tone could become more reconciliatory once the elections are over.
In fact, Trump’s introduction and threats of tariffs and other sanctions have been the main drivers of the recent USD rally, which has been the biggest headwind for emerging markets. Given the extensive media coverage, and as Trump has already threatened to impose tariffs on basically all Chinese imports, a lot of bad news must be priced in. Nevertheless, markets hate uncertainty and volatility is likely to remain high throughout the political campaign period in the US, and to a lesser degree in Brazil. Unless the situation gets completely out of control, we may well see a catch-up rally toward the end of the year.
CC-BY-SA-2.0, FlickrPhoto: ALTSMIA 2017. The Most Important Event on Alternative Investments is Coming to Miami
The ALTSMIA Annual Investor Forum is taking place on November 6th, 2018 at the JW Marriott in Miami. The event gathers the industry’s leading experts from across the alternative investment spectrum for a full day of engaging discussion, education, networking and commentary.
ALTSMIA is developed and led by the CFA Society of Miami, CAIA Miami and Miami Finance Forum. With their guidance and oversight, this one-day event will provide participants with an educationally- focused agenda and will feature leading practitioners from the fields of private equity, venture capital, real estate, hedge funds, cryptocurrency, artificial intelligence and other sectors of the alternative investment market.
Early bird discount rates are available until August 31st.
For further information about the ALTSMIA Annual Investor Forum’s program or how your team can get involved, please contact Paul Hamann at +1 347-308-7792 or by e-mail at Paul.Hamann@marketsgroup.org.
Pixabay CC0 Public Domain . Fintech and Machine Learning Among New Topics for the CFA Program Curriculum in 2019
CFA Institute, the global association of investment management professionals, has introduced its 2019 CFA® Program curriculum for June and December 2019 exam candidates. Guided by a robust practice analysis process that tracks how the investment management profession changes over time, CFA Institute regularly updates its curricula to arm candidates with the skills and knowledge needed for success in the rapidly evolving industry.
“The integration of next-generation knowledge into our curricula on emerging topics like fintech and machine learning ensures our candidates are fully prepared to not only have a place in the industry, but to lead it,” said Stephen M. Horan, CFA, CIPM, managing director of credentialing at CFA Institute. “It is challenging to keep a nearly 9,000-page curriculum up to date, and we take that task very seriously to prepare the next generation of investment managers for the demands of the global capital markets.”
The CFA designation is one of the most respected and recognized investment management designations in the world, and its reputation and that of CFA Institute depend upon maintaining a comprehensive “gold standard” curriculum. To ensure its integrity and relevance, the organization gathers input from practicing investment management professionals, university faculty, and regulators around the globe, who help identify and prioritize the CFA curriculum areas to be added, deleted, or revised.
The 2019 CFA curriculum update includes a total of 10 new readings and major revisions and improvements to 18 existing readings. Among the highlights:
Fintech enters the CFA Program curriculum at Level I and II, surveying the range of technologies and financial applications in investment management, new content on Machine Learning, and ethics cases within a fintech work setting.
New content for Level III in Equity Portfolio Management reflecting the latest practices in the areas of both passive and active equity investing.
New Level III content on Professionalism in Investment Management explaining the characteristics of investment management professions and CFA Institute as a professional body.
20 sets of practice problems supporting new curriculum content.
Candidates study approximately 1,000 hours on average to master nearly 9,000 pages of curriculum. Its depth and breadth provides a strong foundation of advanced investment analysis and practical portfolio management skills, which gives investment professionals a career advantage. To earn the charter, candidates must pass all three levels of the exam, considered to be the most rigorous in the investment profession; meet the work experience requirements of four years in the investment industry; sign a commitment to abide by the CFA Institute Code of Ethics and Standards of Professional Conduct; and become a member of CFA Institute. Less than one in five candidates who begin the program actually become CFA charterholders, a testament to the determination and mastery of professional competencies demonstrated by successful candidates.
