As expected, the Federal Reserve Board yesterday left interest rates unchanged following the September meeting of the Federal Open Market Committee. In its statement following the meeting, the FOMC said, “The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives.”
The Fed appears to be moving its targets. Chair Janet Yellen cited the need to wait for further improvement in the economy, even though there is evidence that the Fed’s goals have been achieved. She indicated that Committee members will continue to assess economic conditions but made no commitment on the timing of a rate increase. According to Bloomberg, the futures market places a 59% probability on a December hike, but the Fed’s shifting views make that uncertain.
The US unemployment rate is at 4.9%, which meets the Fed’s mission of full employment. While Chair Yellen said the labor market has been improving, she also said there is “room for further improvement.” She said, “The fact that unemployment measures have been holding steady while the number of jobs has grown solidly shows that more people, presumably in response to better employment opportunities and higher wages, have started actively seeking and finding jobs.” She added, “This is a very welcome development, both for the individuals involved, and the nation as a whole.”
But Chair Yellen also said there continues to be slack in the labor force and cited the need for further evidence of improvement in the labor market as one reason for leaving rates unchanged. This raises the question of whether the Fed is giving more importance to the broader measure of unemployment, the U6 rate published by the Bureau of Labor Statistics, which includes not only the total unemployed but part-time underemployed workers as well. This rates stands at 9.7%. The market is left guessing how much further the labor market needs to improve before the Fed will raise rates.
Mixed Inflation Signals
The Fed also cited inflation below its 2% target as another reason for holding rates steady. But it is becoming increasingly clear that inflation indicators are being impacted in part by government policies and factors beyond the Fed’s ability to affect the outcome with monetary policy. One such area is healthcare.
The core personal consumption expenditures index (Core PCE), which is the Fed’s preferred inflation index, and the consumer price index (CPI), use different methods to track healthcare expenses, resulting in sharply different data. CPI tracks what American consumers spend out-of-pocket (including insurance premiums) on healthcare, while PCE takes into account all healthcare spending, including costs paid by insurers, Medicare and Medicaid. Under Obamacare, Medicare and Medicaid have been aggressively pushing down reimbursement rates to healthcare providers, while consumers are shouldering higher out-of-pocket costs for healthcare-related expenses.
This government-engineered cost shifting has resulted in significantly different inflation data between PCE and CPI. (Chart) PCE healthcare inflation was up only 1.1% year-over-year based on the most recent July report, while CPI healthcare jumped 1% in August alone, to 4.9% year-over year. It’s worth noting that healthcare has twice the weighting in PCE vs. CPI, at 19.1% vs. 8.5%, reflecting the fact that healthcare providers pick up most healthcare costs. Monetary policy has little influence over the effect of government-mandated healthcare reimbursement rates built into Obamacare, which are holding down Core PCE inflation, while pushing up CPI inflation.
Following the Fed’s decision to hold rates steady we expect further gains for risk assets. In fixed income, we expect yields to drift, with little change in the yield curve until there is a shift in the economic data or a change in Fed policy. We continue to believe that developed markets sovereigns, including most US government debt, look unattractive. Investors are being poorly compensated for duration risk as a result of negative nominal yields and negative real yields. Corporate credit is generally more desirable than Treasuries, however even here values are well below historical averages, with an upward bias on leverage. Floating rate securities, including structured securities and event-linked (catastrophe) bonds, may be attractive to hedge interest rate risk without too much yield give-up. With yields so low and a flatter yield curve, shorter duration positions have become less costly. In equities, we favor large cap stocks over small cap stocks, and see opportunities in mid-cap stocks, many of which are benefitting from secular growth.
What is the procedure for proving a missing or lost Will?
By Alexa Payet, Partner at Bolt Burdon and listed specialist in the Certainty
Contentious Probate Hub & Area
When an individual dies it is necessary to search their paperwork to establish whether they made a Will and gather information regarding their estate. This is important because the personal representatives of the estate have a legal duty to distribute the estate correctly and could be held financially responsible for any mistakes made through any breach of duty.
Where a Will cannot be found but is believed to exist there are a number of steps that can be taken to help confirm its existence, including (but not limited to) the following:
- making enquiries of the deceased’s family and friends;
- making enquiries with the deceased’s professional advisors;
- instructing The National Will Register to undertake a Certainty Will Search.
Presumption of revocation
Where the original Will is known to have been in the testator’s possession before their death and cannot be located afterwards, there is a rebuttable presumption that the Will was destroyed by the testator with the intention of revoking it. If an order for the proof of a copy is to be obtained then this presumption must be rebutted.
Procedure for proving a copy Will
The procedure for proving a copy Will is set out in Rule 54 of the Non-Contentious Probate Rules 1987 (‘NCPR’).
The application is made to the Probate Registry at which the application for the grant will be made and the order can be made by a district judge or registrar.
The application must be supported by evidence in the form of an affidavit (although during the global pandemic the rules have been amended by the Non-Contentious Probate (Amendment) Rules 2020, SI 2020/1059, to provide for the use of witness statements as an alternative to affidavits).
The evidence must set out the grounds of the application and any available evidence that the applicant can adduce as to the Will’s existence after the death of the testator or, where there is no such evidence, the facts on which the applicant relies to rebut the presumption that the Will was destroyed by the testator during his/her life.
The applicant must ensure that the Court has the best available evidence of what happened to the testator’s Will in order that effect may be given to his/her testamentary wishes.
It is important to understand that the applicant does not need to demonstrate that the Will has been lost (it is the fact of its loss which gives rise to the presumption of revocation). Instead, the applicant must establish, by evidence, that the Will was not in fact revoked.
What is a Certainty Will Search and why is it necessary?
A Certainty Will Search searches for Wills that have been registered on The National Will Register (circa 8.7 million Will registrations in the system) and for Wills that have not yet been registered in geographically targeted areas where the deceased used to live and/or work. A Certainty Will Search is extremely important as it will be necessary to notify the probate registry of any persons who would be prejudiced by the grant if the copy Will is proved. If no such person exists then the registrar is more likely to grant the application. Alternatively, if such a person does exist then you should seek to obtain their written consent to the application. The written consents can then be lodged with (or following) your application.
Oil prices rise as investors look to higher demand seen in second half
By Shadia Nasralla
LONDON (Reuters) – Oil prices climbed on Tuesday as optimism that government stimulus will eventually lift global economic growth and oil demand trumped concerns that renewed COVID-19 pandemic lockdowns globally are cooling fuel consumption.
Brent crude futures for March rose 72 cents to $55.47 a barrel by 1152 GMT after slipping 35 cents in the previous session.
“The perception that any retracement will be quick as confidence in economic and oil demand recovery is unlikely to fade away,” said PVM analysts in a note.
U.S. West Texas Intermediate crude was at $52.65 a barrel, up 29 cents. There was no settlement on Monday as U.S. markets were closed for a public holiday. Front-month February WTI futures expire on Wednesday.
Investors are upbeat about demand in China, the world’s top crude oil importer, after data released on Monday showed its refinery output rose 3% to a new record in 2020.
China also avoided an economic contraction last year.
Investors are watching out for U.S. oil inventory data from the industry association API, due on Wednesday, the same day U.S. President-elect Biden’s inauguration speech will likely give details on the country’s $1.9 trillion aid package.
The International Energy Agency cut its outlook for oil demand in 2021, but pointed to a recovery in demand in the second half of the year to an annual average of 96.6 million barrels per day.
“Border closures, social distancing measures and shutdowns…will continue to constrain fuel demand until vaccines are more widely distributed, most likely only by the second half of the year,” it said in its monthly report.
(Additional reporting by Florence Tan, editing by Louise Heavens)
Can Thematic Investing provide investors with growth opportunities in uncertain times?
New whitepaper from CAMRADATA explores
CAMRADATA’s latest whitepaper on Thematic Investing, considers the role this type of investing can play in asset management and explores trends that can permeate society and traverse sectors. The whitepaper includes insights from guests who attended a virtual roundtable on Thematic Investing hosted by CAMRADATA in November, including representatives from CPR Asset Management, Sarasin & Partners, Impact Investing Institute, PwC, Quilter Cheviot, Scottish Widows and Stonehage Fleming.
Sean Thompson, Managing Director, CAMRADATA said, “In these seminal times, thematic investing has the potential to shape how the future unfolds. Yet running a successful thematic fund is no easy feat – it is a bit like navigating unchartered waters trying to identify the trends and the long-term opportunities.
“Trends such as AI and biotechnology are still in their relative early days, for example, and global economies are undergoing dramatic changes. But mapping out certain trends, identifying potential sustainable returns through a unifying thread that spans multiple sectors, could help future-proof investments. “Our roundtable guests considered current key themes, which themes worked well, and which have not and how thematic investors could identify trends with the potential to offer future growth.”
The guests named themes they currently like which included artificial intelligence, China, climate change, clean energy, automation, evolving consumption, ageing, digitalisation, water, waste management, biodiversity, and board diversity.
After discussing themes that have worked or not, the guests looked at total allocation to themed funds, and whether clients might be blinded by themes to the overall risk exposure in their portfolios.
Key takeaway points were:
- Themes have a habit of coming and going. One guest recognised that automation and robotics, for example, were cyclical, which means that investors will have to think carefully about entry-points.
- It was agreed that the commodities ‘super cycle’ of the 2000s came about with the economic development of China. Many commodities-based products found their way into mainstream investing, but this is unlikely to happen again.
- One guest was surprised by some of the themes that interested their customers; with their research showing that Board Diversity was almost the lowest-ranking concern among the ESG choices they listed.
- There was correlation between environmental impact and social benefits to investing. The theme that concerns the Impact Investing Institute, which is less than two years old, is improved measurement of such relationships.
- In terms of successful themes, one clear winner due to COVID had been digitalisation.
- One theme that has not done so well is the Ageing theme focused on older people travelling and enjoying experiences abroad later in life.
- One guest said their firm used themes for ideas generation, not as a shortcut for portfolio construction. They said themes lead to good ideas, but they then spend at least three months researching a stock, so that the best themes are represented by the best investments.
- The final point was that there are sensitivities for any global investor in allocating to themes, even the biggest one of all, Climate Change.
- But on a positive note, one guest added if all stakeholders can resolve their differences on definitions such as impact and ethical investing, then more capital will be readily transferred into opportunities.
The whitepaper also features two articles from the sponsors offering valuable additional insight. These are:
- CPR Asset Management: ‘Central Banks: leading the path towards Impact Investing’
- Sarasin & Partners: ‘Theme or fad? How to invest for the long term’
To download the Thematic Investing whitepaper, click here
For more information on CAMRADATA visit www.camradata.com
Why You Should Take On Debt To Stop Dilution
By Blair Silverberg, CEO of Capital Imagine an exciting space dominated by two major companies, each growing and developing at...
Audi aims to sell one million cars in China in 2023
BEIJING (Reuters) – German premium automaker Audi aims to sell 1 million vehicles in China in 2023, versus 726,000 vehicles...
Netflix forecasts an end to borrowing binge, shares surge
By Lisa Richwine and Eva Mathews (Reuters) – Netflix Inc said on Tuesday its global subscriber rolls crossed 200 million...
MGM Resorts drops takeover plan for Ladbrokes-owner Entain
By Tanishaa Nadkar (Reuters) – Casino operator MGM Resorts International on Tuesday ditched plans to buy Ladbrokes owner Entain after...
Mike Ashley’s Frasers ups stake in Hugo Boss to over 15%
(Reuters) – Mike Ashley-led Frasers said on Tuesday it has increased its stake in German luxury fashion house Hugo Boss...
Sterling rises above $1.37 for first time since 2018; UK inflation rises
By Elizabeth Howcroft LONDON (Reuters) – A combination of heightened risk appetite in global markets and UK-specific optimism lifted the...
Euro sinks amid broader risk rally against dollar
By Ritvik Carvalho LONDON (Reuters) – The euro struggled to join a broader risk rally against the dollar on Wednesday...
Britain to publish new weekly consumer spending data
LONDON (Reuters) – Britain’s statistics office said it would publish new weekly consumer spending data from Thursday, based on credit...
Mercedes unveils electric compact SUV in bid to outdo Tesla
By Nick Carey (Reuters) – Daimler AG’s Mercedes-Benz on Wednesday unveiled the EQA, a new electric compact SUV as part...
England soccer star Rashford nets younger buyers for Burberry
By Sarah Young LONDON (Reuters) – Burberry stuck to its full-year goals on Wednesday after a media campaign fronted by...