Allocator Hosts Global CIO Summit at St Andrews
Allocator (formerly HedgePo) last week hosted its annual Global Chief Investment Officer Summit (“Summit”) at the Fairmont St Andrews Bay Hotel. The Summit is unique in bringing together key investment decision makers, cutting edge CEOs and leading academics. The speakers discussed the disruptive trends that are shaping our world and the consequential investment opportunities and risks that will be faced in 2016 and the coming decade.
Each speaker delivered a brief ‘TED style’ talk, focussing on long-term investment themes and possible future market issues. Disruptive trends they highlighted for investors and fund managers to watch out for in 2016 and the coming decade include:
Cornelia Meyer, Chairman at Gasol Plc, CEO of MRL Corporation and member of the World Economic Forum`s Global Agenda Council for Energy Security:
- Oil prices will overshoot in the next 18 months.
Dr. Arnab Banerji, Chairman of Collabrium Capital and former Senior Policy Advisor on Economic Affairs to Prime Minister Tony Blair:
- China’s GDP growth is likely to have fallen from 10% to 5%, which is equivalent to the UK falling from 2% to recession.
- In the last 4 years China has used as much concrete in construction as the USA did over the last 100 years. A skyscraper was built in 19 days!
Jeffrey Bower, United Nations Digital Payments & Financial Inclusion Specialist:
- In the last 5 years 700m+ people have opened a digital financial services account, bringing in emerging markets.
- 78% of the Developing World still do not have credit scores.
- All 4 telecom companies in Canada have applied for banking licences and got them – this is very disruptive for the banks. The developed world is playing catch up to the developing world on this.
Edward Perello, Founder of Desktop Genetics:
- It cost $3bn over 13 years to sequence the first human genome from 2000-2013.
- DNA sequencing now costs $1000 and it takes half a day.
Hilary Natoff, Portfolio Manager at Fidelity Investments:
- In 2030-40 there will be more people in the world over 60 than under 15 years old.
- We are living through history’s largest ever urbanisation wave
- By 2100, 89% of the world’s population will be in today’s emerging markets
- Global population growth is now slower than the last 10 years and the global dependence ratio became adverse in 2013 for the first time in the history of the world.
Nick Irish, Global Head of Equities at UBS Asset Management:
– Japan is changing. Japanese corporate earnings have doubled in the last 4 years; 40% due to FX, but 60% due to structural changes in firms.
Hussein Kanji, Partner at Hoxton Ventures:
- There are 219 tech unicorns. 2/3 are in the private market.
- Europe is a leader in mobile technology, music streaming and distribution platforms.
- 39 venture capital funds are raising capital in London at the moment – more than ever.
- The European Venture Capital market hasn’t caught up with the US and Israel
- A US startup can expect to raise 3-4x as much capital as a similar European one. But this is changing.
Set in the legendary grounds of St Andrews, the Summit is an opportunity for the decision makers to exchange ideas with their peers and engage in debate with inspiring thought leaders. Whilst having the opportunity to indulge in various outdoor activities, including golf on the famous championship course.
Allocator used the opportunity to announce its name change to attendees with David Tawil, Co-Founder, stating: “Our company was built by investors, from the perspective of investors. We know the problems they face. We’re on their side. Our solutions work across asset classes. We’re Allocator.”
Allocator provides an effortless solution to the management of fund data. The streamlined network-based process gives investors access to the information they need, in real time and in a format that’s useful to them. The platform is already used by over 650 institutional investors and family offices; and has over 1600 funds on board, equivalent to data on over $4trn of assets.
David Tawil, Co-Founder, said: “The summit is a unique event that merges the leading minds in finance with thinkers and entrepreneurs in other sectors over two days of discussion and networking. Speakers participate because they have the opportunity to share their insights with some of the most influential investors from around the world.”
650 institutional investors and family offices; and has over 1600 funds on board, equivalent to data on over $4trn of assets.
The platform provides a means for fund managers to permission and pipe information to current and prospective investors. Investors have valuable information at their disposal and functionality to be able to garner meaningful insights. Funds have also been able to raise capital successfully through the portal.
World stocks’ dance to continue, but inflation could mute the music – Reuters poll
By Vivek Mishra and Rahul Karunakar
BENGALURU (Reuters) – The bull-run in global stocks fuelled by cheap cash and reflation hopes will continue for at least another six months but a rise in bond yields as inflation expectations grow could throw a spanner in the works, Reuters polls found.
Despite severe economic damage from the pandemic, MSCI’s global stock index — which tracks shares across 49 countries — notched up all-time highs this month, having risen over 70% since hitting rock-bottom in late March amid ample liquidity from central banks and massive fiscal stimulus.
In recent trading sessions, world stocks have pulled back as a rapid surge in global bond yields raises expectations that major central banks could eventually turn less accommodative in a bid to tame inflation.
But even as a gauge of equities slipped this week on hints of rising inflation led by higher oil prices and the strongest copper price in nearly a decade, the Feb. 12-24 polls of nearly 300 equity strategists found the trend of stock market gains was set to continue this year.
All 17 major stock indexes polled on by Reuters, from Tokyo to Toronto, were expected to end 2021 higher from here, with nine predicted to extend their record-setting rallies.
Fifteen of those indexes have already breached the mid-2021 consensus level and 10 indexes are above the end-2021 median level predicted in the previous poll in November.
In response to an additional question, over two-thirds, or 79 of 111 analysts, said the run-up in global stocks would continue for at least another six months, including 58 who said over a year.
“It’s the health-crisis nature of this recession that has led to the greatest monetary and fiscal policy response in history. It’s not that people are so bullish about the future but rather they are flush with cash and the excitement of making money,” said Michael Wilson, chief U.S. equity strategist at Morgan Stanley.
“Our advice here is to take pause and observe a bit as these excesses are wrung out; but bear in mind we are at the beginning of a new economic cycle and that usually means a multi-year bull market has begun.”
With over 65%, or 72 of 110 strategists who responded to a separate question, expecting corporate earnings to return to pre-COVID-19 levels within a year, stock markets from developed to emerging were forecast to rally through 2021. [EPOLL/JP][EPOLL/IN][EPOLL/RU][EPOLL/EU][EPOLL/BR][EPOLL/US][EPOLL/CA]
“In some sectors and markets, corporate earnings are now above their pre-virus levels, whereas in the energy sector and some of the other badly hit sectors they are still below,” noted Simona Gambarini, a markets economist at Capital Economics.
“That is why we think the next leg-up in equity markets will coincide with a rotation towards coronavirus-vulnerable sectors.”
But concerns were growing for a significant market correction as surging U.S. Treasury yields on rising inflation prospects have triggered caution over pricey equity valuations.
Those fears have already hit shares of high-flying growth companies and top technology-related firms, which were at the heart of a stunning rally that drove major indexes to record levels.
That was also reflected in a market gauge of inflation expectations, the Treasury Inflation Protected Securities’ (TIPS) break-even rate, which has risen this month, with the yield on 30-year U.S. TIPS rising above zero for the first time since June.
When asked about the likelihood of a significant correction — commonly defined as a fall of 10% or more — in stock markets in the next six months, 87 of 115 respondents said it was “likely”, including 27 who said “very likely”.
“Yes, there are those pesky rising long-bond yields that could, like an overlooked reactor vent, be the fatal flaw in the blueprints that blow everything up,” said Michael Every, global strategist at Rabobank.
“But let’s overlook that systemic risk … After all, central banks can always adopt yield curve control if needed and take away that market function — striking it down and seeing it disappear without shoes or underpants left as reminders.”
(Other stories from the Reuters Q1 global stock markets poll package:)
(Reporting by Vivek Mishra and Rahul Karunakar, Additional reporting and polling by correspondents in Bengaluru, London, Mexico City, Milan, New York, San Francisco, Sao Paulo, Buenos Aires, Tokyo and Toronto; Editing by Jonathan Cable and Catherine Evans)
GameStop stock doubles in afternoon; even Reddit is surprised
By David Randall and SinÃ©ad Carew
NEW YORK (Reuters) – GameStop Corp shares more than doubled in afternoon trading on Wednesday, surprising those who thought the video game retailer’s stock price would stabilize after recent hearings in the U.S. Congress prompted by the fierce rally and steep dive that upended Wall Street in January.
GameStop shares were up 60% after hours at around $146, following a 103% rise during the day’s trading.
Trading in GameStop was halted several times following a rally that began around 2:30 pm Eastern time Wednesday with no obvious catalyst.
Analysts that follow the stock could not point to one single reason for the sharp move, offering reasons that included a corporate reshuffle.
“GameStop announced the resignation of its CFO last night. Some may have taken this as a good sign that RC Ventures is making a difference at the company in terms of trying to accelerate the shift to digital,” said Joseph Feldman, an analyst at Telsey Advisory Group.
Stephanie Wissink, analyst at Jefferies Research declined to comment on the afternoon stock spike but referred to her research report following the CFO resignation. Wissink said it did not seem like a coincidence that the CFO resigned after the company settled with activist investor Ryan Cohen’s RC Ventures.
“We expect GME to pursue a CFO with a more extensive tech (vs. retail) background, which will be a signal of the direction the company is due to take in coming years,” Wissink wrote in her note.
The spark also seemed to take posters on Reddit’s popular WallStreetBets forum by surprise.
“Why is GME going back up. is it Melvin covering?!,” one user wrote.
In January, shares of GameStop soared more than 1,600% as retail investors bought shares to punish hedge funds such as Melvin Capital that had taken outsized bets against the company. Melvin Capital said it lost 53% before closing its position in GameStop.
Other so-called “stonks” – an intentional misspelling of ‘stocks’ – favored by retail traders, also shot higher in Wednesday afternoon trading. AMC Entertainment Holdings Inc gained 18%, while BlackBerry Corp rose nearly 9%. Shares of Canadian cannabis company Tilray Inc gained nearly 13%.
The retail trading frenzy was the subject of hearings in Washington last week, where Keith Gill, a Reddit user and YouTube streamer known as Roaring Kitty who had boosted the stock with his videos, reiterated that he was a fan of the stock.
Shares of GameStop remain nearly 74% their all-time high reached on Jan. 27 despite Wednesday’s rally.
(Reporting by David Randall; Editing by David Gregorio)
Analysis: Central banks say no tapering. Markets aren’t buying it
By Sujata Rao and Dhara Ranasinghe
LONDON (Reuters) – Central bankers worldwide have been unequivocal: There are no plans to cut back on money-printing any time soon, let alone raise interest rates.
Markets don’t seem to be buying it.
U.S. 10-year Treasury yields rose on Wednesday to one-year highs above 1.4%, extending this year’s near 50 basis-point jump that has dragged up sovereign borrowing costs in Europe, Japan and elsewhere.
The reckoning is that the spending step-up by U.S. President Joe Biden’s administration and post-vaccine economic reopening will fuel a global growth-inflation rebound, forcing central banks to “taper” or withdraw stimulus ahead of schedule.
A brighter outlook may indeed justify higher yields. But what has started to spook markets is a sudden move up in so-called real yields, or returns in excess of inflation. That shift can tighten financial conditions, suck cash from stock markets and in general, hamper the recovery.
It’s spooking policymakers, too. From the Federal Reserve’s Jerome Powell to New Zealand’s Adrian Orr, many have weighed in this week to stress policy will remain loose for some time.
But the mantra they have chanted for years seems now to be falling on deaf ears.
Powell, the world’s most powerful central banker, knocked yields just a couple of bps lower even after commenting that the inflation target was more than three years away.
Euro zone yields only briefly heeded European Central Bank chief Christine Lagarde’s warning on Monday that the bank was “closely monitoring” the recent rise in yields.
(GRAPHIC – Who’s uncomfortable with rising bond yields?: https://fingfx.thomsonreuters.com/gfx/mkt/jbyvrdbewve/de2402.png)
(GRAPHIC – Powell reassures bond markets but yields stay high: https://fingfx.thomsonreuters.com/gfx/mkt/xlbvgdmzapq/US2402.png)
The reason, according to ING Bank is that markets are pricing “with an increasing degree of conviction” the end of ultra-easy policies.
“Market confidence in the strength of the U.S. recovery is so strong and widespread that the tapering boat has sailed already,” they said, predicting “tapering” to happen by the end of 2021, earlier than the early 2022 predicted by Fed surveys.
“We expect consensus is converging to our view,” they added.
Money markets show investors expect a Fed rate rise next year; some bet on an even earlier move. Euro-dollar futures suggest a roughly 64% chance of a 25 basis-point rate hike by the end of 2022. A week ago it was seen at 52%.
If travel, dining out and shopping fully resume in coming months, it could unleash trillions of dollars in pent-up savings worldwide. Just in the United States, personal savings totaled $2.38 trillion at a seasonally adjusted annual rate in December, higher than at any time before the pandemic.
(GRAPHIC – U.S. savings: https://fingfx.thomsonreuters.com/gfx/mkt/azgpoeylypd/Pasted%20image%201614185996035.png)
That makes it an inflection point of sorts for the economy, according to April LaRusse, head of fixed income investment specialists at Insight Investment. At times like this, even strong forward guidance can fall flat, she said.
“Markets hear central bankers saying ‘Stop it, markets, you are going too far’, but they are worrying central banks might change their mind as new data emerges,” LaRusse said.
“Markets are saying: ‘Yes, we believe what you are saying, but conditions could change and could necessitate a change of policy’.”
It’s a similar picture elsewhere.
In New Zealand, Orr’s highlighting of potential downside risks to the economy contrasted with the buoyant picture painted by data.
Bond yields shrugged off his comments to hit 11-month highs. More importantly, overnight index swaps (OIS), instruments allowing traders to lock in future interest rates, have started pricing a small possibility of an end-2021 rate hike.
Not long ago it was seen cutting rates below 0%.
BNY Mellon noted across-the-board rises in one-year forward inflation swaps — essentially gauges of future inflation — from Canada to Australia.
“Risks are now more toward further removal of easing prospects,” they added.
There is of course the possibility that the pledges to keep policy ultra-loose in the face of recovering growth only fan inflation expectations further. So, could markets force central banks to act rather than just jawboning?
Here the Fed faces less of a dilemma than its peers.
Japan’s 10-year yields are near the highest since late 2018 at 0.12%, posing credibility issues for a central bank that aims to hold yields around 0%.
The ECB too, already struggling to lift growth and inflation, may have to step up bond purchases under its emergency asset-purchase programme to combat rising yields.
“At the moment it’s a tension between markets and central banks rather than a conflict, though that might come,” said Jacob Nell, head of European economics at Morgan Stanley.
“The attitude of the Fed is that if markets think growth is stronger than we do then that’s fine, it will help growth and inflation expectations. So the Fed won’t fight the market — it just doesn’t believe it.”
(Reporting by Sujata Rao and Dhara Ranasinghe; Editing by Hugh Lawson)
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