Brief : Federal Reserve Chair Jerome Powell said Tuesday that he expects recent price spikes will soon subside and reduce inflation to a sustainable level. Consumer prices jumped 5% in May compared with a year earlier, the largest increase in 13 years. But Powell said the increase mostly reflected temporary supply bottlenecks, and the fact that prices fell sharply last spring at the onset of the pandemic, which make inflation figures now, compared with a year ago, look much larger. “As these transitory supply effects abate, inflation is expected to drop back toward our longer-run goal,” he said in testimony prepared for a congressional oversight panel. Powell’s comments come at a time that financial markets are struggling to interpret the Federal Reserve’s recent moves. Last week Fed officials signaled that they may increase the central bank’s benchmark interest rate twice in 2023, an earlier time frame than they set out in March, when no rate hike was expected until after that year. Powell also said the Fed had formally begun discussing when and how the central bank might reduce the current $120 billion a month of Treasury’s and mortgage-backed bonds that the Fed is purchasing each month. Those purchases are intended to keep longer-term interest rates lower to encourage more borrowing and spending.
Brief: An Ernst & Young survey has found that Canadian employees have embraced workplace flexibility and want it to continue post-pandemic. The 2021 Work Reimagined Employee Survey found that 93 per cent of respondents said they would likely remain with their organization for the next year or more if they have control over where and when they work. But 54 per cent would be willing to quit if flexibility on schedule and work location is not maintained. Even if top-notch, on-site office amenities are offered, two-thirds would prefer to control where and then they work with respondents being 1.4 times more likely to opt for having control over working hours. Some 61 per cent want their company to require vaccines before returning to physical workspaces. Nearly half say company culture has improved since the beginning of the pandemic in early 2020. "Whether you know — and accept — it or not, your employees have been forever transformed, and walking back this sea of change isn't an option," says Darryl Wright, partner, People Advisory Services at EY Canada.
Brief: GHO Capital Partners has amassed the largest ever healthcare-focused private equity fund for a Europe-headquartered firm in a sign LPs are backing GPs in one of the most sought-after secular growth industries. The London-based healthcare specialist raised more than €2 billion in LP commitments for GHO Capital III, according to two sources with knowledge of the fundraise. The firm began raising capital for the vehicle six months ago with a €1.25 billion target. The launch was a little over one year after GHO raised €975 million for its oversubscribed sophomore vehicle. It is unclear what the hard-cap is for Fund III and the firm is understood to have not yet held the final close on the fund. Los Angeles County Employees’ Retirement Association committed €100 million to the vehicle, according to PEI data. Fund III is the biggest Europe-headquartered healthcare fund in history, knocking out ArchiMed’s MED Platform I, which collected €1 billion in August last year. Similar to prior funds, Fund III will back mid-market companies in Europe within healthcare subsectors pharmabio, medtech, outsourced services and patient services. It is unclear how much of Fund III has been deployed thus far.
Brief : Volatility is back for global stock markets, triggered by uncertainty over central banks’ plans for monetary policy and rising Covid-19 cases around the world. The VIX volatility index, a real-time measure of volatility expectations over the next 30 days, inched lower on Monday. Last week, the VIX spiked more than 16% to its highest point since May, as markets digested a surprisingly hawkish turn from the U.S. Federal Reserve. The Dow Jones Industrial Average also logged its worst week since October, and futures contracts tied to the index initially fell more than 200 points in early premarket trade on Monday before reversing course to open higher. Monday’s choppy trade also played out in Asia, where Japan’s Nikkei 225 closed 3.3% down, and Europe, where the continental Stoxx 600 index dropped 0.8% in early trade, only to recoup its losses and advance into positive territory. Matteo Andreetto, head of State Street Global Advisors’ SPDR ETF business in the EMEA region, told CNBC on Monday that with Covid cases rising, the potential for monetary tightening and high equity valuations on a historical basis, a market correction could be possible.
Brief: The Canadian Securities Administrators (CSA) today released its fiscal year 2020/2021 Enforcement Report, which provides details on enforcement efforts and outlines how securities regulators are protecting investors and the integrity of Canada’s capital markets… “This year’s Enforcement Report highlights how CSA members adapted quickly to evolving circumstances by introducing new ways of protecting investors, while staying ahead of emerging issues and trends,” said Louis Morisset, Chair of the CSA and President and CEO of the Autorité des marchés financiers. The report outlines how CSA members continued to strengthen their technical knowledge on critical and emerging topics, such as open-source intelligence and mobile forensics, and implement best practices and tools across the country to recognize and target fraudulent activity. The CSA also formally launched the Market Analysis Platform (MAP) in October 2020. MAP is a data repository and analytics system designed to help all CSA members identify and analyze market misconduct. The system has increased efficiency and speed in accessing and analyzing trading activity, which is critical as capital markets continue to evolve.
Brief: As the world went into lockdown last year, hedge funds stuck by the companies that suffered the most. It paid off. Some of the industry’s biggest names loaded up on companies that were pummeled as Covid-19 prompted government lockdowns and social-distancing guidelines, according to hedge fund consultant PivotalPath. They’re the hotels, casinos, cruise lines, restaurant chains and theme park companies that people are longing to frequent again as the pandemic recedes in the U.S. “Despite popular belief that hedge funds all made money shifting into tech and remote-environment stocks, most hedge funds actually made money because they stayed in the beaten-down names, or they ramped up those investments,” said PivotalPath Chief Executive Officer Jon Caplis. “They saw that a lot of the economy was going to come back.” While some funds bought up stocks that boomed as workers stayed at home -- like Zoom Video Communications Inc. and Peloton Interactive Inc. -- those wagers were on the margin, Caplis said. And, they were placed early in the pandemic -- even in February, before stocks plunged as major cities ground to a halt in March, he said. Those bets helped offset losses from the selloff. But once technology stocks jumped in April, hedge funds pivoted into the hammered “Social Distance Loser” stocks -- as Caplis calls them -- or increased their existing positions in them, he said.