Brief: Worries over surging inflation and a new variant of the coronavirus are roiling the U.S. corporate junk bond market, though some believe the tumble could draw investors seeking higher yields. November marked the worst month since the start of the pandemic for the bonds of low-rated companies, with high-yield bonds notching an average return of minus 1.03%, the lowest since March 2020, according to Morningstar Direct data. Spreads, which indicate the yield premium investors demand to hold junk-rated debt over safer U.S. Treasuries, also widened the most since the beginning of the COVID-19 pandemic. Among the factors driving the moves were fears that higher inflation will force the Federal Reserve to normalize monetary policy faster than expected, as well as a rush away from comparatively risky assets on worries over the Omicron variant, analysts said. “With most managers sitting on healthy returns for the year, there’s a bit of de-risking as well,” said John McClain, portfolio manager at Brandywine Global Investment Management.
Brief: 'For people doing IR, I think this pandemic has been so fundamental in terms of changing their daily lives,’ says Thomas Kudsk Larsen, talking to IR Magazine about why he made the move from pharma giant AstraZeneca – made a topic of household debate across the globe by the pandemic – for Swedish small-cap biopharma firm Sobi (short for Swedish Orphan Biovitrum) where he now serves as head of communication and investor relations. Part of the issue is the nature of investor relations itself. As such an outward-looking profession – where the job is really about talking to people, whether investors, management, other departments or external stakeholders – much of what Larsen says was important to him about the job has changed. Outside of the busy quarterly results periods, IR people are usually out and about having meetings, holding site visits or traveling to conferences and busy roadshows. Of course, all that stopped with Covid-19 and, although virtual stepped in, for people like Larsen who thrive from that personal contact, something vital had been lost. Many believe things won’t go back to the way they were either: four in five IROs believe the experience of Covid-19 will lead to a permanent change in roadshow activity, according to IR Magazine’s Global Roadshow Report 2021, with more than a third strongly believing we will not see a return to the pre-pandemic norm.
Brief: The recent market turmoil caused by the emergence of the omicron virus strain may offer investors a chance to position for a trend reversal in reopening and commodity trades, according to JPMorgan Chase & Co. While it is likely that omicron is more transmissible, early reports suggest it may also be less deadly, which would fit into the pattern of virus evolution observed historically, strategists Marko Kolanovic and Bram Kaplan wrote in a note Wednesday. This might ultimately be a positive for risk markets because it could signal that the end of the pandemic is in sight, they said. “Omicron could be a catalyst for steepening (not flattening) the yield curve, rotation from growth to value, selloff in Covid and lockdown beneficiaries and rally in reopening themes,” the strategists said. “We view the recent selloff in these segments as an opportunity to buy the dip in cyclicals, commodities and reopening themes, and to position for higher bond yields and steepening.” The emergence of the new virus strain has roiled markets in recent days, with countries around the world stepping up travel restrictions.
Brief: The number of acquisitions made by private equity-backed businesses across the UK shown signs of stabilising after a buoyant period, according to Rickitt Mitchell’s Buy and Build Barometer. The latest analysis from the corporate finance firm, conducted in partnership with Experian Market iQ, reveals 125 deals were completed in Q3 2021, down 25 per cent on the second quarter of the year. Bolt-on transactions had hit a record high in Q1 2021, with 196 completed at a value of GBP2.3 billion. In the regions, the South East (16), East of England and London (both 14) continue to be the best performing areas for dealmaking, while Yorkshire is outperforming the rest of the Northern regions with 11 transactions completed during Q3) – a record amount for the area. Figures from the Buy and Build Barometer suggest that deal values accumulated this year have also followed a similar trend, with Q3 figures decreasing by 75 per cent to GBP235 million from GBP943 million in Q2 2021. While the number of transactions completed reflects the same number of bolt-on deals as in Q2 2020, the value of the deals has retracted year-on-year by 25 per cent from GBP313 million.
Brief: Legendary investor Ray Dalio has warned people against trying to time the market as uncertainty about the Omicron coronavirus variant shakes stocks. Dalio told CNBC on Tuesday that the most important thing for investors is to be in a safe, well-balanced portfolio and to not try to be too smart. "You will not market-time this. Because even if you were a great market timer, the things that are happening can change the world, so it changes what should be priced into the markets," he told CNBC's Andrew Ross Sorkin. The discovery of a new coronavirus variant, which the World Health Organization has called Omicron, has triggered volatility in stocks after a placid period for the market. The US benchmark S&P 500 index dropped 1.9% Tuesday, after Moderna's CEO said existing vaccines were unlikely to be as effective against the new virus strain. Scientists are rushing to find out more about Omicron. In the meantime, investors have been left guessing about the possible economic impacts. Many analysts have recommended staying invested and said that the fundamentals of the US stock market still look sound.