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Mega trend environmental technology
The global population will reach 10 billion people by 2100, with masses streaming into the cities. The environmental problems are becoming more challenging as we speak due to the exploitation of raw materials and the climate change, which has manifested itself via ever more frequent freak weather events. The call for the cautious handling of […]
Brexit: Breakin’ up is hard to do – Part IV
Stock markets not impressed – so far While the debate about Brexit is getting more intense (just a day ago the UK Treasury released its warnings) and the Pound Sterling is trading near historical lows as the referendum is approaching, the UK equity market has not shown any signs of stress. Its valuation premium to […]
Brexit: Breakin’ up is hard to do – Part III
What financial markets are telling us about Brexit The UK’s exit from the European Union – known as “Brexit” – would be a major economic and political event for the UK, Europa and the wider world. While Brexit is not the most likely outcome, it is a real possibility, raising questions, how financial markets will […]
Brexit: Breakin’ up is hard to do – Part II
The economic implications of Brexit Opinion polls and betting odds as well as the muted response of debt and equity investors suggest that Brexit – the UK’s exit from the EU – is not the most likely scenario. That said, it cannot be ruled out. For example, about a quarter of all opinion polls conducted […]
Brexit: Breakin’ up is hard to do – Part I
The likelihood of Brexit On June 23, 2016 the UK will hold a referendum. Voters will decide whether the country should remain a member of the European Union (the “Bremain”-scenario), or whether it should leave the EU (the “Brexit”-scenario). Arguably, Brexit marks the most significant tail-risk for European and global asset markets in 2016.
Challenging environment on the Stock Exchange
The recovery from the slump on the equity markets we saw at the beginning of the year is coming to an end. The rally is losing steam. The search for new supporting factors in addition to the expansive central bank policies is difficult. In line with the general strategy “sell on highs”, we took the […]
Financial injection from the biotec-sector
Every year, the best funds and investment companies that show a constantly high, risk-adjusted performance within their comparison group are awarded with the Lipper Fund Awards. This year, our biotechnology equity fund got full marks in Germany over a time period of five years, compared to all other international biotechnology funds.
Value versus Growth: Which investment approach to choose?
Everybody who has read academic literature on the performance of shares will know about the fact that value shares (and small cap shares) outperform so-called growth shares in the long run.
Broad diversification is still the order of the day
Gerhard Beulig, fund manager and responsible for the YOU INVEST line, expects capital markets to remain highly volatile for a while. The central banks are trapped by their own extreme interest rate policy; interest rates therefore remain at practically zero percent for short-term investments, with no trend reversal in sight. Investors who want to earn […]
Expansive central bank: The Only Game in Town
The Council of the European Central Bank (ECB) further loosened its monetary policy on 10 March 2016. In view of the decline of the leading economic indicators and the excessively low inflation in the Eurozone, the bundle of measures introduced by the ECB is necessary. But, to paraphrase Mohamed El-Erian, the expansive central bank policy […]
Capital markets take a little breather
The economic indicators are falling but do not suggest a recession. The central banks are implementing expansive measures in order to fight deflation risks and to stabilise the financial markets. Hence, the data is slightly better than capital markets were expecting. This gives room for a little breather.
Investors are focussing on the USA
The United States are currently in the spotlight, given the primary elections for the US presidential election in November. But what does the US economy look like at the moment?
Earnings season triggers downward revisions
Earnings are key for equity investors, as also my colleague Harald Egger emphasized in this blog two weeks ago. This basic truth is even more relevant as usual at a time when a multi-year equity bull market has ended and a wobbly global economic backdrop is weighing on market sentiment. In this situation, corporate earnings […]
Emerging Markets: Opportunities with Corporate Bonds
In an interview with Péter Varga, Senior Fund Manager Erste Asset Management, I am discussing the chances and risks with investments in emerging markets corporate bonds. Many Investors feel unsettled by the weak performance of the emerging markets. Why is this the case?
Short-term recovery
Growth is weak, and the downside risks are elevated. However, in a pre-emptive move, the market has already priced in the materialisation of some of the risks. The current development would not immediately suggest it. A short-term phase of recovery on the equity markets would fit this picture. The past days and weeks have not […]
Current earnings development advises caution
The international stock exchanges recorded a rather dismal start into the new year. The reasons cited most frequently were China and the declining oil price. A weaker Chinese economy will definitely register also on an international scale due to the mere size of the country. While a weaker oil price is beneficial to consumers, it […]
Losses reflect economic worries
The losses on the stock exchanges and in other risky asset classes unsettle investors. The additional expansive signals sent by the central bank support markets, albeit only by a minor degree. From an economic perspective there are no convincing signs for a trend reversal. The current correction is due to permanently low growth and to […]
Are global equity markets too expensive?
Interview with Peter Szopo, equity strategist Erste Asset Management (EAM) and Andreas Rieger, fund manager of ESPA STOCK GLOBAL ESPA STOCK GLOBAL is an actively managed equity fund that invests in selected single stocks from around the world. In the last year the fund gained 14.31%, over the last five years the annualized performance was […]
Turbulent capital markets: what to expect in 2016?
The price declines on the equity markets at the beginning of the year suggest a decline in investor confidence. Is this justified? Please find a few hypotheses for 2016 in the following:
Capital market review 2015
Capital markets experienced significant price fluctuations in 2015. While euro government bonds recorded a relatively good performance contrary to expectations, riskier bond segments such as high-yield corporate bonds were disappointing. Regionally speaking, stock exchanges recorded a very mixed set of performances. Emerging markets such as China and Brazil ended up on the disappointing side, whereas […]
ECB fights deflations risks
On 3 December the European Central Bank loosened its monetary policy further. The reaction from the markets was that of disappointment, as assets had had more extensive measures priced in.
The US dollar is lead currency
A young father is always pressed for time. What he needs is in particular is a good strategy. One of my strategies in selecting reading material is to just wait. Time will tell what is interesting and what is not. Which is why last week I read a book that had come out in 2011: […]
Interest rate lift-off – Stay cool
Following last week’s surprisingly strong employment report, the odds that the US Federal Bank will start raising its policy rate at the next FOMC-meeting in December jumped to almost 70%. Of course, 70% is still short of 100%, but most observers believe that something terrible must happen in the next four weeks to make the […]
Turkish Elections Update
With the current outcome, the uncertainties in Turkish economies are off the table. AKP (governing party Justice and Development) will now have 316 seats in the parliament. This is enough to form a single party government, still, it falls short of constitutional majority – the most market friendly outcome. There will be a positive sentiment […]
Janet Yellen: Inflation Fighter
The US central bank Fed hinted at an increase of the Fed funds rate in December at its meeting on 28 October. A bias towards such an increase is referred to as tightening bias. If the economic data permit it, the Fed will increase the Fed funds rate from practically zero percent. The extent and […]
Turkish Elections Round Two
Turkish early elections to be held on 1 November, 2015; and once more, the market is waiting for a positive outcome. Neither the country nor the market has more tolerance to absorb any further political uncertainty; however, the election outcome may not be too different from the results back in June 2015. Nevertheless, this time […]
Mario Draghi – Deflation Fighter
The arguments supporting a further rise in share prices have become stronger. The important central banks have been sending expansive signals in recent weeks, i.e. signals that support the economy and the markets. The latest measure was the statement made by the president of the European Central Bank (ECB), Mario Draghi, at the ECB press […]
Twilight over the Capital Markets
Are we now on the other side of the recent price decline in the risky asset classes? Global equities, bonds with default risk, and emerging markets have been recording significant gains. Has the fundamental situation improved, or had the assets excessively negative events priced in?
The summer of our discontent
Only in a few months we will likely know, whether the bull market that started in mid-2009 really ended in the summer of 2015. What we know, however, is that the headwinds that have emerged in recent months will not recede anytime soon. Another challenging quarter, it seems, lies ahead of equity investors.
Will 2016 be “The Good”, “The Bad“ or „The Ugly“?
The beginning of Q4 is the time for an outlook on the coming year. At first we want to establish the determining factors for the economic activity and the markets. On this basis, we will introduce three scenarios.
The refugee crisis: there is no way around a comprehensive solution
The current refugee crisis is immense. Estimates expect more than a million people to apply for asylum this year in the European Union; i.e. we are talking about 0.2% in terms of total population. This would suggest that the immigration can be handled if all the countries cooperate.
All eyes on Washington: Will the Fed funds rate be raised?
Interest rate decision by the Fed Tomorrow, Thursday 17 September 2015, the federal Open Market Committee (FOMC) of the US central bank Fed will be taking an important decision. Is the Fed funds rate to be raised or not? The financial markets have accorded this decision a particularly important role. After all, the rate hike […]
The return of volatility
Earlier this year the president of the ECB said we would have to get used to elevated levels of volatility. And it is true, the market environment has changed. The years 2009 to 2014 were subject to an asset price reflation regime. High rates of return were coupled with low volatility. This relationship has now […]
Turkey and the feeling of summer time sadness
We are almost approaching the end of the summer but it looks like we are back to April 2015 in Turkey. The election outcome and aftermath did not work as politicians had desired and the efforts to form a government have failed so far.
“Black Monday” at the stock exchanges: Why?
Market correction Equities, bonds affected by default risk, commodities, and emerging markets currencies are currently subject to corrections, which, noticeably, have now gone beyond the purview of emerging markets: while the emerging markets equity index declined by almost 6% (Performance-Data Source: Bloomberg, MSCI) last week, the index for developed markets lost 5.3% (Performance-Data Source: Bloomberg, […]
Devaluation of the Chinese currency
On 11 August China devalued its currency by 1.9% relative to the US Dollar and announced that in the future it would expose the exchange rate of the Renminbi to the forces of supply and demand on the foreign exchange market. In a press conference the Central Bank did say, however, that it would continue […]
“Quarterly Capitalism” under attack
If you thought “quarterly” was a simple adverb characterizing a regularly recurring activity, you may need to reconsider. A new term is making the rounds: “quarterly capitalism” – and in this context, “quarterly” stands for “short-term, myopic, greedy and dysfunctional”. In fact, the term was already invented four years ago by Dominic Barton of McKinsey […]
Emerging countries under pressure
Commodity prices have fallen drastically since the beginning of July. The commodity price index provided by Bloomberg has fallen by nearly 12%. In fact, many commodity prices are locked in a bear market. The index is currently almost 50% below the level of the beginning of 2011. Over the same period the currencies of emerging […]
China weighs heavy on commodity prices and production
Global GDP growth has probably only increased marginally in Q2 after the very weak Q1. Economic activity has thus remained disappointingly weak on a global scale.
Turning more positive on CEE equities
In searching for a perfect example of a sideways market one does not need to look further than at Central and Eastern European (CEE) equity markets. The CECE Composite, a Euro-based index of 23 Polish, Czech and Hungarian blue-chips (Bloomberg: CECEEUR), has been range bound for nearly four years, rarely trading outside a narrow range […]
Agreement between Iran and the P5+1 countries depresses oil price
The negotiations between Iran and the UN veto powers plus Germany were concluded successfully on Tuesday, 14 July. Iran will curtail its nuclear programme. In exchange, the international economic sanctions will be reduced. The result is remarkable in so far as the interests of the P5+1 (the five permanent members of the UN Security Council […]
When will the earnings momentum rise on the European equity markets?
The stock exchanges have been moving sideways and down for weeks. There are of course enough uncertainty factors such as the Greek crisis, the correction on the Chinese stock exchange, and the expected interest rate increase in the USA that can serve as explanation. However, one factor that has (so far) been left out of […]
Parallel currency in Greece?
Last Sunday, the Greek people decided with a clear majority to follow the proposal of their government. With 61.3%, the No camp rejected the conditions of the expired adjustment program. Thereby, Greece is one step closer to an exit from the Eurozone and the European Union.
Greece – the never ending story
The breakdown of the negotiations between Greece and its creditors as well as the planned referendum on 5 July troubles capital markets. Greece itself is formally not insolvent. As long that this is not the case the European Central Bank (ECB) will do whatever it takes to contain spillover risks. After the referendum, the next […]
Bond investments in the current environment
After the recent, rather substantial corrections on the bond markets many investors were wondering: “Can or should I still invest in bonds or bond funds in view of possibly rising interest rates?” Let’s first have a look at the bonds with the highest quality within the Eurozone, i.e. German government bonds. Where have the prices […]
Measuring Greek risk
The longest eleventh hour in recent history is drawing to a close. However, while the negotiations earlier this week seem to have narrowed the gap between Greece and its creditors, a final deal has not emerged yet.
High noon in Greece and the trend to volatility
Summary: The economic recovery in the developed economies is supported by the very expansive monetary policies, lower austerity pressure on the government front and among banks, and the fallen oil price. Growth rates remain moderate. In the emerging markets we can see signs of low-level stabilisation at best. The possible default of Greece, excessive interest […]
Is the Eurozone facing a turnaround in interest rates?
Eurozone government bonds have ensured very good performance returns in the past years. The asset class has benefited from the zero interest rate policy and the very expansive monetary policy of the European Central Bank. In recent weeks the prices of bonds from Eurozone countries have gone through a correction, above all German government bonds. […]
Could the outcome of Turkish parliamentary elections lead to increased volatility?
The upcoming parliamentary elections on Sunday in Turkey could force Erdogan to postpone his plan for a new constitution and could lead to new political leaders in the Ministry of Finance and the Ministry of Economics. This would trigger an increase in uncertainty and consequently a higher degree of volatility for the Turkish Lira and […]
Emerging markets equities: no comeback at this point
Based on earnings expectations emerging markets equities are currently valued 27% below the price/earnings ratio of developed markets equities. The long term average of this discount is 19%. Closing the gap is a question whether the confidence of the markets in the earnings expectations is solid enough to facilitate a re-(e)valuation.