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Brief: The first year of the COVID-19 pandemic fueled a frenzy for biotechnology stocks. Now, with vaccines in millions of arms and the Omicron variant on the wane, there are signs investors are ready to move on. After cresting at nearly $5 billion a month in early 2020, inflows into health care funds have slowed to a more modest $800 million a month, according to data compiled by Bloomberg Intelligence. While that suggests that a healthy appetite for the shares of vaccine makers and other drug companies remains, the excitement—and fear—stoked by the early days of the pandemic has subsided. What's more, those who embraced the shares of riskier drug makers have taken their lumps of late. The Nasdaq Biotechnology Index, the most widely watched gauge of the sector's performance, has lost 26% since hitting a 52-week high on Aug. 9 including a decline of 1% as of Monday at 9:55 a.m. The SPDR S&P Biotech, or XBI, an exchange-traded fund that specialists use to track the industry’s performance, has plummeted about 42% over the past year.
Brief: Karthik Sarma outearned Steve Cohen last year. The little-known hedge fund manager made an estimated $2 billion in 2021, mostly thanks to an 11-year-old wager on Avis Budget Group Inc., a bet that paid off handsomely as the stock soared 456%. Sarma, it’s safe to say, isn’t your stereotypical, fleece-vested Manhattan hedge fund manager. When the pandemic struck, he didn’t flee to the Hamptons, Palm Beach or Aspen like many other Wall Street elites. Instead, he moved in with his sister and her family, living in their modest home in a middle-class New Jersey suburb, where the houses sit side by side -- and there’s only room for two cars in the driveway. Sarma, 47, runs his firm differently, too. At SRS Investment Management, he avoids the hefty leverage many other funds embrace, and runs a much more robust short book. Moreover, he isn’t afraid to go big on a single investment — and hang on for as long as it takes.
Brief: There’s nothing like a good dose of volatility to get allocators once again thinking about hedge funds. Investors had hedge funds on their minds well before the market rout this year. About half of U.S. allocators plan to increase their investments in hedge funds in 2022, according to the latest report by the Alternative Investment Management Association. In December, the group surveyed 224 allocators across the country, with 49 percent working at foundations and endowments, 15 percent at public pensions, and 11 percent at family offices. While private equity remains the top choice of investors, hedge funds have begun to attract some attention again, according to the AIMA report. “Three years ago, many institutions were indeed adjusting their alternatives portfolios away from hedge funds. And often doing so vocally. They were making space for larger allocations to the likes of private credit and real assets,” the report said. “While the trend toward illiquid opportunities remains, we anticipate some positive changes with a renewed focus on hedge funds this year.”
Brief: Mid-market private equity investment rebounded "spectacularly" in the Midlands during 2021, according to the latest figures from KPMG. The findings, which track deal flow and sentiment, show 2021 generated an upturn in both deal volume and value when compared to 2020. The region experienced an increase of 54 per cent in volumes with a total of 86 deals completed, up from 56 in 2020. Additionally, the Midlands leapfrogged the North West to become the second largest region by deal value at £5.3bn, up from £3.5bn. The number of private equity exits completed in the Midlands also increased from 17 to 25, further surpassing 2019 levels of activity and ranking the region second only to London. Alongside this, the value of Midlands-based exit deals also accelerated to £2.5bn, a 133 per cent increase from £1.1bn. Khush Purewal, partner and head of deals for KPMG in the Midlands, said: "Mid-market private equity deal activity rebounded spectacularly in the Midlands during 2021, as confidence to complete transactions returned and pent-up demand was released.
Brief: During the worst throes of the COVID-19 pandemic, very few people could travel. Meanwhile, both 2021 and 2022 were predicted to be the years of “revenge travel” where people would do a great deal more. Or at least plan more. In the background was a site that allowed people to travel virtually, either out of sheer interest, or to plan their own travel. Heygo’s live tours are live-streamed by, it says, tour guides in more than 90 countries and counting. Think “Twitch, but for travel”. It’s clear that plenty of people cottoned-on to the site and its usefulness during the pandemic, because Heygo has now raised a $20 million Series A funding round, led by Northzone. Also Participating was Lightspeed Venture Partners, Point 9 Capital, TQ Ventures and Ascension. Heygo is tapping into a different kind of creator economy. Their guides can share the places and subjects they love on their own live channels with a global audience while earning money via tips. It’s managed to hit a 300% growth in bookings this January over last year, and recently hit the 2 million bookings mark, claims the company.
Brief: Baker Steel Capital Managers LLP, a large resource investment fund based in London, boosted its stake in Canadian miner Iamgold Corp. by nearly 40 per cent in 2021, reasoning that there was value to be unlocked in the gold miner with operations in Canada and Africa. So it came as a shock to Mark Burridge, chief executive and managing partner of Baker Steel, when news broke last month that Iamgold’s chief executive, Gordon Stothart, was leaving abruptly after less than two years in the top job. “When the announcement came with the CEO leaving, yeah, we got a little bit uncomfortable,” Burridge said in a recent interview. “We’re not the guys who build the big position just to then, you know, knock on their door and say, ‘Hey, you know, we’re the big shareholders, you need to do what we say.’ That’s not our style at all.” But with a 2.8 per cent stake in hand as of the end of 2021, they felt they had to do something, so they contacted management and the board with suggestions on how to turn the company around. They weren’t alone.
Brief: As a virus-weary world limps through the third year of the outbreak, experts are sending out a warning signal: Don’t expect omicron to be the last variant we have to contend with — and don’t let your guard down yet. In the midst of a vast wave of milder infections, countries around the world are dialing back restrictions and softening their messaging. Many people are starting to assume they’ve had their run-in with Covid-19 and that the pandemic is tailing off. That’s not necessarily the case. The crisis isn’t over until it’s over everywhere. The effects will continue to reverberate through wealthier nations — disrupting supply chains, travel plans and health care — as the coronavirus largely dogs under-vaccinated developing countries over the coming months. Before any of that, the world has to get past the current wave. Omicron may appear to cause less severe disease than previous strains, but it is wildly infectious, pushing new case counts to once unimaginable records.
Brief: The first year of the Covid-19 pandemic fueled a frenzy for biotechnology stocks. Now, with vaccines in millions of arms and the omicron variant on the wane, there are signs investors are ready to move on. After cresting at nearly $5 billion a month in early 2020, inflows into health-care funds have slowed to a more modest $800 million a month, according to data compiled by Bloomberg Intelligence. While that suggests that a healthy appetite for the shares of vaccine makers and other drug companies remains, the excitement — and fear — stoked by the early days of the pandemic has subsided. What's more, those who embraced the shares of riskier drugmakers have taken their lumps of late. The Nasdaq Biotechnology Index, the most widely watched gauge of the sector's performance, has fallen 25% since hitting a 52-week high on Aug. 9. The SPDR S&P Biotech, or XBI, an exchange-traded fund that specialists use to track the industry’s performance, has plummeted 44% over the past year. Over the same span, the broader market has been climbing, with the S&P 500 up 13%.
Brief: January was the worst month for public stocks since March 2020 as investors wrestled with inflation fears. In contrast, the value of private companies, by a number of measures, held far steadier last month. The comparison is an important one, given that more companies are choosing to stay private longer — and a record number of them reached the $1 billion “unicorn” valuation mark last year. Of course, by definition, private companies are less volatile. They don’t trade in the same way as public securities on exchanges where their prices fluctuate in real-time. Instead, committees or outside firms calculate private company valuations based on the performance of public peers and other metrics on a quarterly basis. Valuations can also be plucked from a company’s most recent funding rounds. Many experts argue private companies are just as volatile as public stocks, but the risk is hidden from view.
Brief: JPMorgan Chase & Co. said fully vaccinated staff no longer need to wear masks anywhere in its U.S. buildings, amid an easing up in Covid-19 cases that’s paved the way for Wall Street staff to return to offices. The biggest U.S. bank said in a memo to employees that masks are now “completely voluntary” unless there are more stringent local restrictions in place. Unvaccinated staff or those that have chosen not to disclose their status will need to wear a mask, apart from when they’re at workspaces or eating and drinking. “With Omicron cases declining in many U.S. locations, and expected to continue to decline, vaccine boosters and treatments more readily available, and a large percentage of our workforce vaccinated, we are continuing to make adjustments to some of these safeguards,” the bank said in the memo.
Brief: For much of the past two years, money managers were handing out credit to just about anyone that asked for it: Tech startups with no profit. Cruise companies struggling to navigate a pandemic. Retailers that rely on fading malls. But in less than two months, the carefree days of ultra cheap credit have shown signs of coming to an end. Central banks around the world that pumped trillions of dollars into markets to keep economies afloat are now rushing to scale back the liquidity and fend off inflation. Those efforts could be hastened after U.S. Labor Department data on Thursday showed higher-than-expected price increases in January. Across debt markets, borrowing has gotten harder for the riskiest companies and more expensive for even the most creditworthy. Orders for new U.S. investment-grade notes are dropping. Rogers Communications Inc., a Canadian wireless company, last week scaled back its ambitions on a $750 million bond offering that was initially contemplated at $1 billion, and ended up paying more interest than it expected, according to a person with knowledge of the deal.
Brief: Collateralized loan obligation managers in Europe are preparing for the post-pandemic world of rising credit risk by adding more flexibility to their traditionally strict structures. CLOs -- which package speculative debt into bonds -- have been including options to participate in restructurings and remain involved in financings even if they go south. And while managers don’t expect a sudden deterioration of junk-rated loans and bonds anytime soon, with defaults in Europe still historically low, they want to be prepared in case things sour. “With the ability to follow their money, CLOs now have better options to sell out if they have significant concerns on poor recoveries or provide new money and benefit from the potential upside of any turnaround,” said Oliver Harker-Smith, a portfolio manager at Barings in London. CLOs historically had strict checks on their documents regarding the risks they were able to take. This meant that more often than not they were forced to sell their positions in situations when borrowers got distressed.
Brief: Over the last number of months some of the most popular stocks of 2020 and 2021 plummeted as their figures failed to impress, with Netflix, Peloton and Spotify all seeing share prices tumble. One thing they all have in common is the subscription model. This has led experts to question whether those models can continue to succeed particularly when consumers are facing a cost-of-living squeeze and there is substantial competition sitting in the wings. "Companies which saw high demand for services as the pandemic took hold like Peloton, Spotify and Netflix have suffered because they have not been able to hook customers in for the long haul as much, as economies have opened up and other forms of socialising have taken over," explained Susannah Streeter, senior investment and markets analyst Hargreaves Lansdown. "They are seen more as one trick ponies, offering either TV streaming, gym classes or audio on demand."
Brief: UK GDP rose 7.5% over the course of 2021, defying the year’s three-month opening lockdown and emerging variants to record the highest rate of growth since 1940. This increase followed a record 9.4% decline in 2020, as a result of the onset of lockdowns and the pandemic. Despite a variety of restrictions across the home nations, GDP only dropped slightly in December, down 0.2% for the month, less than the consensus 0.5% expectations. Emma Mogford, fund manager at Premier Miton Investors, described this as an "encouraging sign for the health of the economy", adding the "self-imposed protect Christmas" lockdown had only a "mild impact" on December growth. Daniel Casali, chief investment strategist at Tilney Smith and Williamson, agreed, suggesting that with restrictions lifted, the economic outlook is "constructive" for 2022.
Brief: Since the pandemic erupted two years ago, Forest Ramsey and his wife, Kelly, have held the line on prices at their gourmet chocolate shop in Louisville, Kentucky. Now, they're about to throw in the towel. In the past year, the costs of ingredients for their business, Art Eatables, have surged between 10% and 50%. The Ramseys are paying their employees 30% more than they did before the pandemic. And in the face of supply shortages, their packaging costs are up. They've begun using 12-piece trays in their eight-piece chocolate boxes because they can no longer get any eight-piece trays. So having just tried to survive for the past two years, the Ramseys, who own three retail outlets and sell custom chocolates to about 25 bourbon distilleries, have reached an unpleasant decision: They're going to raise their customer prices 10% to 30%. “We’ve got to adjust this — we can’t afford to keep taking the hits anymore,” Forest Ramsey said.
Brief: Consumer prices surged more than expected over the past 12 months, indicating a worsening outlook for inflation and cementing the likelihood of substantial interest rate hikes this year. The consumer price index for January, which measures the costs of dozens of everyday consumer goods, rose 7.5% compared with a year ago, the Labor Department reported Thursday. That compared with Dow Jones estimates of 7.2% for the closely watched inflation gauge. It was the highest reading since February 1982. Stripping out volatile gas and grocery costs, the CPI increased 6%, compared with the estimate of 5.9%. Core inflation rose at its fastest level since August 1982. The monthly CPI rates also came in hotter than expected, with headline and core CPI both rising 0.6%, compared with the estimates for a 0.4% increase by both measures.
Brief: Oil recovered from earlier losses as soaring U.S. consumer prices prompted traders to pour into commodities as a hedge against inflation. Futures in New York rose as much as 2.3% on data that showed U.S. inflation rose to a four-decade high. Central banks are under pressure to tame higher consumer prices, boosting the chances of further interest-rate hikes. While equities dropped after the U.S. data was released, oil is viewed as a safer bet as the dollar loses purchasing power. “When you have an inflationary period, that’s generally good for commodities,” said Stewart Glickman, energy equity analyst at CFRA Research in New York. “As a physical commodity, oil tends to hold its value better. Oil and gold are now seen as safer havens while other assets are being inflated out.” Also keeping crude afloat are the market’s consistent signals of tight supplies. U.S. crude stockpiles fell to the lowest since 2018 last week. Geopolitical tensions remained a supportive factor as Russian forces started joint military exercises in Belarus that include drills near the border with Ukraine.
Brief: Only seven of the 28 largest Chinese quant hedge fund managers – those managing more than CNY10 billion – generated positive returns in the last quarter of 2021, according to a report in The Wall Street Journal. High-Flyer Quant took the biggest hit losing an average of more than 11 per cent across its funds and made a public apology to investors as a result, citing problems with its algorithms and rapid industry growth for the setback. By comparison, seven of the 28 generated cumulative returns of more than 100 per cent over the past three years according to fund distributor Simwuang. And the company predicts that as Chinese quants increasingly trade against each other, the opportunities to generate excess returns will dwindle.
Brief: After the long slog of the pandemic, we were hoping we would be able to welcome some of our clients in person at our annual conference last week. In fact, we had planned ourfirst ever hybrid conference, with attendees joining us in London and more participating remotely from their homes and offices. But as we have learnt repeatedly over the past couple of years, the virus has no respect for our plans. When Omicron hit and the government confirmed the extension of plan B measures in early January, we reluctantly took the decision to move the whole thing online. Fortunately, another thing that has happened over the past couple of years is that technology has made advances that might otherwise have taken a decade. I cannot deny that the experience of speaking on stage in an almost empty auditorium was a strange one. But, thanks to innovations made by our virtual event partner, many of the small but vital interactions that delegates experience when they attend conferences in person were still possible. Almost four times as many delegates attended online as could have been accommodated in the venue.
Brief: Most of Wells Fargo & Co's employees, including those in customer-facing roles, will return to their offices on March 14 and work under a hybrid flexible model, according to a company memo seen by Reuters on Wednesday. The bank had delayed plans to bring its staff back to the office in December, citing "changing external environment" amid the spread of the Omicron coronavirus variant. At the time, it had said it would announce plans for a full return in the new year. The San Francisco-based bank's announcement comes a little over a week after Goldman Sachs Group Inc ushered its U.S.-based staff back to the office with several of its rivals set to follow a similar return this month as the number of COVID-19 cases drop. Contact center employees and those in operations will return shortly after staff employees resume work from office, the memo said, adding that there is no change to the work schedules for essential employees.
Brief: Unless your name is Meta (FB) or Peloton (PTON), the fourth quarter earnings season has been surprisingly kind to corporate America. Leaving the beleaguered social network (whoops, I mean metaverse pioneer) and fitness brand aside, Q4 results have continued to post strong growth in the face of the Omicron variant of COVID-19, skyrocketing inflation and supply chain headwinds. The latest of the encouraging batch of results came from Chipotle (CMG), which expects to top 7,000 restaurants in North America this year, continuing to ride the COVID-19 era trend of digital orders that accounted for around 42% of Q4 sales, Yahoo Finance’s Brooke DiPalma reported on Tuesday. The closing chapter of 2021 saw S&P 500 growth up over 23%, with nearly 80% of companies beating earnings estimates, according to S&P Global data. That’s been just enough to mollify an incredibly jumpy market where investors are struggling to adjust to the impending end of cheap money.
Brief: The financial markets were battered by extreme volatility in January, but macro hedge funds saw strong, negatively correlated gains in the choppy environment, according to a Hedge Fund Research report. “In 2021 and 2020, higher beta strategies were the best performing strategies; risk-on dominated over that period of time,” Kenneth Heinz, president of HFR, told Institutional Investor. “January was the opposite of that — equities declined, fixed-income declined, and commodities were up.” Heinz said that compared to most investment methodologies, macro strategies generally produce the lowest returns, but their relatively low correlation to short-term market movements can make them a perfect antidote to a tough, volatile market environment like the one seen in January. HFR’s macro index gained 0.85 percent in January, and the HFRI 500 Macro Index grew 1.35 percent.
Brief: The pandemic has been transformational for many businesses, but few can boast near-global domination the way Pfizer (PFE) can. The Pfizer/BioNTech (BNTX) vaccine accounts for 70% of all doses in the U.S. and E.U., as of February 5, according to CEO Albert Bourla Tuesday. He added that the vaccine and other Pfizer medicines reached 1.4 billion patients in 2021, or about one in six people on Earth. As a result, the company saw a 92% increase in operational revenue growth in 2021 alone, of which only 6% was not related to its COVID-19 vaccine, Comirnaty, or it oral treatment, Paxlovid. "This year, we'll do 5% operating growth, excluding COVID and Paxlovid," said CFO Frank D'Amelio. But that didn't seem to sway investors Tuesday, as the company's stock took a hit on news that it would miss revenue estimates for the upcoming year. But Bourla said the company sees sustained need for the vaccine and oral treatment, which supports the 2022 outlook.
Brief: The top risks facing global economies are supply chain disruptions, easing central bank policy and new Covid variants, according to a survey of international fund selectors carried out by Natixis Investment Managers. The 436 global fund selectors expect to "battle a difficult market landscape" in 2022 as inflation hits 30-year highs, central banks across the globe withdraw stimulus, while client expectations "exceed realistic returns", the survey found. Between them, the fund selectors - based in 23 countries across Africa, the Americas, Asia and Europe - manage a combined $12.6trn in client assets. Half of them are concerned about the impact of supply chain disruptions to the global economy, while 45% said less supportive central bank policy is a top economic risk. Meanwhile, recent disruptions caused by the Omicron variant of Covid-19, such as frontline labour shortages, prompted 40% of the fund selectors to rank new Covid variants as a key cause for economic concern in 2022.
Brief: Investors in Europe are less optimistic than they were in the autumn of last year, with rising interest rates and inflation among the biggest concerns, according to the latest UBS Investor Sentiment survey. The decline in optimism is, however, from a relatively high base. The survey by UBS showed that in Europe, excluding Switzerland, investor optimism has fallen nearly 10 percentage points since the previous survey in the third quarter of last year, with 68% of European investors feeling optimistic about the region’s economy in the short-term.Short-term optimism in stocks has also fallen, with 43% planning to invest more in the next six months. Switzerland bucked the wider European trend. Swiss investor optimism is up from last quarter, with 68% feeling optimistic about their economy in the short-term, a 12 percentage points increase from the previous survey.Among Swiss investors, 68% are optimistic about Swiss stocks, up from 46%.
Brief: A plummet in European bond prices on the prospect of the European Central Bank withdrawing its stimulus has erased two-and-a-half years of gains. The total return on investment-grade debt from the region’s governments has fallen more than 3% this year to the lowest since the middle of 2019, according to the Bloomberg Euro Government Index. That means any investors tracking the benchmark have lost their gains since then. The latest leg lower reflects bonds losing value following the ECB’s shift to a more hawkish stance last week to deal with a surge in inflation. That followed the first loss in European government securities last year since 2006. Italian debt has been the worst performer.
Brief: With pandemic restrictions in the U.K. largely gone, offices are getting busier. Yet vast numbers of desks still remain empty. Even with Covid-19 case numbers flat or falling in the U.K., U.S. and much of Europe, many employees are still actively choosing to work from home for at least part of the week. It’s increasingly hard for managers to claim that their offices will simply fill up when the virus abates. Companies large and small are now adopting hybrid work patterns unrecognizable from pre-pandemic routines — all but killing off the five-day-a-week commute. Few predicted such a seismic shift, even when the pandemic began. “Everybody really did have an expectation that it would all go back to normal. And I think now is a dawning realization that it isn’t,” said Julia Hobsbawm, author of The Nowhere Office: Reinventing Work and the Workplace of the Future, to be published in the U.K. this month and the U.S. in April.
Brief: How asset owners rebalance their portfolios depends on how they value private investments — and there’s more than one way to get it right. According to a recent paper published by PGIM, massive market dislocations like the one that took place in March 2020 leave asset owners with a conundrum: if, and when, they should rebalance. “When reported private equity valuations lag public market valuations during public market declines, CIOs often find their portfolios over-allocated to PE,” the paper said. But the lag in valuations may not represent the most updated private equity performance data, meaning that allocators could be rebalancing when they don’t have to. PGIM explored two different ways to value private investments: proxy market value (PMV) and the Takahashi Alexander (TA) model. What PGIM found is that the decision to rebalance is affected significantly by the valuation method an allocator uses, and that the appropriate use for each depends on the type of institution using it.
Brief: Medical officers from Canada’s two major airlines and Toronto Pearson Airport have written an open letter requesting that the Canadian government move PCR testing from travellers at airports and into communities. Canada’s mandatory testing requirements for travel have led to significant flight cancellations for Air Canada and WestJet. The letter argues that because people travelling to Canada must get a PCR test prior to entering Canada and must be fully vaccinated, there is no good public health reason to require a second test upon arrival. “Over the last two months, Omicron has quickly become the predominant variant of Covid-19. As it spreads throughout our communities, we need to ensure Canada's limited testing resources are being used where Canadians need them most—to support our communities, schools, hospitals and long-term care homes.
Brief: Coming off a volatile five-day period to close out January last week, the stock market continues to run wild as investors reconsider rebalancing their portfolios. Consistent profits may be more difficult to come by in the near future as markets adjust to new financial conditions, one portfolio manager asserts. First Republic Private Wealth Management CIO Christopher Wolfe joined Yahoo Finance Live on Monday to discuss the outlook for the market in 2022. “It is [an investible market], let’s be clear about it,” Wolfe said. “But I think the Fed’s gonna make it a bit more challenging than it has in the past. Just so we’re clear, it’s been really easy in the past, because the monetary base has been growing so wildly.” As the Fed pursues a more hawkish monetary policy to curtail inflation, which reached 7% last December, markets have been especially jittery. Consensus economists expect a 7.2% increase in the Consumer Price Index in January, reflecting a cooling — though still undesirably high — rise in inflation.
Brief: Bank of Montreal has started bringing investment and corporate bankers back to their offices this week, and is seeking to have staff fully returned on a hybrid basis by early April. Bankers began their return on Feb. 7, and workers on all teams will spend two to three days a week in the office as of April 4, Alan Tannenbaum, head of global investment and corporate banking, said in a memo to staffers last week. Employees who aren’t vaccinated will have to continue working from home, according to the memo.Bank of Montreal’s plans mark one of the first moves by Canada’s banks to start refilling offices after the omicron variant caused a wave of infections that prompted governments to tighten restrictions and recommend companies let employees work remotely.
Brief: Investors pulled the most money last week from a popular high-yield bond fund since the coronavirus crisis first landed in the U.S. The SPDR Bloomberg High Yield Bond ETF JNK, -0.10% saw outflows of $717 million last week, according to FactSet Research. That’s the most since March 2020, according to Bloomberg News. Some investors have been encouraged by the resilience of credit during the stock-market turbulence of 2021. This year, the high-yield fund has slipped 3%, which is less than the 6% drop for the S&P 500 SPX, 0.01%. Investors like corporate bonds as an alternative when the economy slows but doesn’t fall into a recession. While equities suffer as growth prospects slump, companies are likely to continue to meet their debt obligations as long as the economy is growing.
Brief: 2022 is starting with several issues that could create serious volatility for traders in the months ahead. Aside from the supply chain problems and other economic disruptions caused by the pandemic, tensions triggered in the Indo-Pacific and Eastern Europe have added to growing uncertainty. The commodity markets are poised for potential price adjustments from the ancillary effects of these tensions. The situation in the Indo-Pacific is a slowly developing story between China and Taiwan. With Taiwan one of the largest producers of semiconductors, any disruptions could produce shortages and serious supply chain issues for everyone using semiconductor chips. The Forex markets might also be a good proxy for these developing events. Moves in the yuan and yen could foretell possible problems. The Ukrainian situation is a bit different in that there are two main markets which could be directly affected: grains and energy.
Brief: It was the first glimmer of hope for the beleaguered travel industry in 2020 when locked-down citizens started doing something new amid the pandemic: not working from home, but working from anywhere. Off they’d go for weeks or months at a time, to any locale with good surf and better Wi-Fi, to show off a new Zoom background after early morning swims. Today the era of decamping from your hometown might seem as far in the rearview mirror as a five-day, in-person workweek might appear on the horizon. But a new version of the trend is emerging—and it could prove a serious boon for the travel industry. The ability to work from home is profoundly, and permanently, changing the way we travel. More lenient office policies mean many workers can travel anytime, even during busy workweeks, as long as they can hit deadlines from far afield.
Brief: That bleak jobs report the White House had been bracing for never arrived Friday. Instead, President Joe Biden got the pleasant surprise that the U.S. economy had powered through the omicron wave of the coronavirus and posted 467,000 new jobs in January — along with strong revisions to job gains in the two prior months. It showed just how much the pandemic's grip on the economy has faded, though the nation is still grappling with high inflation. “Our country is taking everything that COVID has to throw at us, and we’ve come back stronger," Biden declared at the White House. The jobs report suggested the United States has entered a new phase in its recovery from the pandemic. And it capped something of a comeback week for the president. Also on Friday, the House passed a bill to jumpstart computer chip production and development, a key step for reconciling differences with an earlier measure approved by the Senate.
Brief: Money has flooded out of emerging market securities at breakneck speed in January as concerns over geopolitical tensions, monetary policies and recovery speeds gave investors the “jitters”, according to the latest data from the Institute of International Finance. With flows into emerging markets totalling an estimated $1.1bn for the month, IIF said increased volatility has generally pushed investors out of their emerging market bets. In December last year, IIF said foreign investment in emerging markets had come to an "abrupt standstill". Following a global pattern, inflation still remains an issue for many policymakers across the emerging market landscape while geopolitical tensions brew. IIF economist Jonathan Fortun said: "We see investors pulling money from emerging markets' bonds and equities at the fastest pace since March-2021, as anxiety builds over tighter monetary conditions, geopolitical frictions and fears that many economies will not recover quickly enough from the pandemic this year.
Brief: Canada’s labor market suffered a larger-than-expected setback last month after the nation was hit with fresh lockdowns meant to contain the omicron variant of COVID-19. The country shed 200,100 jobs in January, Statistics Canada reported Friday from Ottawa, ending a seven-month streak of gains. Economists in a Bloomberg survey were expecting a drop of 110,000. The unemployment rate rose to 6.5 per cent, from 6 per cent at the end of last year. Despite the setback, analysts expect a rebound as early as this month as containment measures are lifted, putting the economy back up against what the Bank of Canada believes is full capacity. Still, the sharper-than-expected decline could raise questions about the timing of Governor Tiff Macklem’s expected interest rate hikes. The Canadian dollar fell 0.7 per cent on the report to $1.2763 per U.S. dollar as of 9:22 a.m. Yields on Canadian two-year bonds rose, after U.S. employers added more jobs than expected in January.
Brief: Companies often say that employees are their most important asset, but you’d never know that by looking at corporate boards. Directors largely come from the ranks of current and retired CEOs, finance chiefs, lawyers and investors, with a smattering of academics thrown in. What you rarely found in the boardroom were human-resources experts.That’s changing. With workers quitting jobs at a record clip and corporate cultures convulsing over issues like remote work, burnout and diversity and inclusion, boardrooms are opening the door to more directors with actual experience managing workforces. The share of directorship roles across all companies in the S&P 1500 with specific human-resources skills increased to 19.4% in January from 11.3% two years ago, according to ISS ESG, the responsible-investing arm of Institutional Shareholder Services.
Brief: European oil majors are erasing their pandemic slump as tensions between Russia and the West drive Brent crude above US$92 a barrel. The Stoxx Europe 600 energy sub-index is outperforming all other sectors on Friday as crude heads for its seventh week of gains. Shell Plc, BP Plc and TotalEnergies SE led the rally, and the companies have now either erased their pandemic losses entirely or are close to doing so. Energy stocks have had the best returns in Europe so far in 2022 and strategists are bullish on a sector that underperformed in the past three years. A tight market and tensions around Ukraine have sent crude prices soaring. Now, investors are looking to earnings and guidance from the biggest companies to see where the stocks go from here.“Energy stocks are an attractive diversifier as the sector remains absolute and relative cheap with ongoing earnings upgrades,” said Ulrich Urbahn, head of multi-asset strategy and research at Berenberg. “On top, the sector could also benefit from geopolitical tensions, strong nominal GDP growth in 2022, rising bond yields and heightened inflation risks.”
Brief: Swiss drugmaker Roche said on Thursday sales growth would slow this year as it braces for less demand for its COVID-19 medicines and tests, expecting immunity against the novel coronavirus to prevail in the population from about April. In an earnings statement, the company said it expected currency-adjusted 2022 sales to be flat or grow in the low-single digits, below last year's 9% gain. Roche anticipates sales of COVID-19 medicines and diagnostics to decrease by about 2 billion Swiss francs ($2.17 billion) to around 5 billion francs, it added. It proposed raising its 2021 dividend to 9.30 francs per share but its stock fell 2.6% on the outlook. Group earnings edged higher in 2021 as brisk demand for COVID-19 diagnostic tools and new prescriptions for drugs such as Hemlibra against haemophilia and cancer immunotherapy Tecentriq offset a sales decline in older cancer drugs.
Brief: Despite uncertainty caused by Covid-19, economic and geopolitical factors, new analysis from KPMG has confirmed that mid-market private equity investment in the UK in 2021 soared to the highest level ever recorded. Both volumes and values saw a boost, as a total of 803 deals, worth GBP46.8 billion were completed in 2021 - an increase of 40 per cent and 36 per cent, respectively. KPMG’s latest study also showed that while disruptions caused by the pandemic made 2020 an atypical year for dealmakers, the levels of activity seen in 2021 still surpassed pre-pandemic levels, with deal volumes up 20 per cent and deal values up 15 per cent, compared to 2019. The UK’s private equity market overall also thrived with a total of 1,545 deals worth GBP159.2 billion completed in 2021, up from 1,117 in 2020 and 1,246 in 2019. In line with the increase in values, KPMG’s research found that deal multiples rose across the UK private equity market, from 8.7x earnings in 2020 to 9.6x in 2021, while multiples in the mid-market remained fairly steady at 10.4x in 2021, versus 10.7x earnings in 2020.
Brief: Amid inflation worries and market volatility, a growing number of institutional investors are beginning to hand over the portfolio reins to active managers. The trend can be seen in the findings of a November CoreData Research survey of 378 global institutional investors. When institutional investors were asked what they considered to be the most important elements of portfolio construction in the current economic environment, 31 percent pointed to the need to hire skilled active managers. Thirty-seven percent of institutional investor respondents identified the importance of diversifying into uncorrelated assets. Institutional investors indicated that they believe inflation will pose the biggest risk to their investment portfolios in the coming year.
Brief: Companies handed a combined £1.3bn in controversial fast-track Covid contracts with minimal scrutiny also claimed at least £1m in furlough grants, it can be revealed. Analysis of the accounts of companies that won lucrative emergency contracts to supply personal protective equipment (PPE) to the NHS during the height of the pandemic shows 12 also claimed funds to put staff on furlough at taxpayers’ expense. Many had no prior history of supplying PPE but received huge boosts in revenue after securing deals to supply items ranging from gowns to masks. Overall the scramble to obtain PPE resulted in the Department of Health and Social Care (DHSC) spending £9bn on personal protective equipment that was either substandard, defective, past its use-by date or dramatically overpriced.
Brief: Last year’s tight labor markets are given marketing and distribution professionals in alternative investments a lot more job mobility and the opportunity to earn a higher paycheck. According to Sasha Jensen, founder of eponymous executive search firm Jensen Partners, compensation skyrocketed for these professionals, including those in junior roles. This comes alongside more movement generally in the industry. With increasing competition among alternative investment managers for investors’ capital, firms are in search of the right employees to raise funds. What’s more, long-established and new alternatives firms have started launching new products and strategies — meaning there are more jobs for the taking. “The Great Resignation in our universe just meant multiples of new hiring,” Jensen said. But it’s not as though companies are struggling to find top talent.
Brief: Bank of Montreal plans to start bringing investment and corporate bankers back to their offices next week, and is seeking to have staff fully returned on a hybrid basis by early April. Bankers will begin their return on Feb. 7, and workers on all teams will spend two to three days a week in the office as of April 4, Alan Tannenbaum, head of global investment and corporate banking, said in a memo to staffers Tuesday. Employees who aren’t vaccinated will have to continue working from home, according to the memo. Bank of Montreal’s plans mark one of the first moves by Canada’s banks to start refilling offices after the omicron variant caused a wave of infections that prompted governments to tighten restrictions and recommend companies let employees work remotely. Bank of Nova Scotia and Manulife Financial Corp. were among the Canadian financial firms that had set January dates for large-scale returns to their offices, only to pull those plans as omicron spread.
Brief: Employment at U.S. companies declined in January by the most since the early days of the pandemic as the omicron variant of the coronavirus registered a swift yet likely temporary blow to the nation’s labor market. Businesses’ payrolls fell by 301,000 last month in a broad-based decline, according to ADP Research Institute data released Wednesday. The median forecast in a Bloomberg survey of economists called for a 180,000 rise. The decrease in employment, due to a surge in Covid-19 infections that led to some business closures and restrained activity, exacerbates tightness in the job market. A near-record number of unfilled positions and increased employee turnover are contributing to capacity constraints. Still, employment growth is seen picking up as the spread of the omicron variant wanes.
Brief: Spurred by a massive inventory rebuild and consumers flush with cash, the U.S. economy last year grew at its fastest pace since 1984. Don’t expect a repeat performance in 2022. In fact, the year is starting with little growth signs at all as the late-year spread of omicron coupled with the ebbing tailwind of fiscal stimulus has economists across Wall Street knocking down their forecasts for gross domestic product. Combine that with a Federal Reserve that has pivoted from the easiest policy in its history to hawkish inflation-fighters, and the picture has suddenly changed substantially. The Atlanta Fed’s GDPNow gauge is currently tracking a first-quarter GDP gain of just 0.1%. “The economy is decelerating and downshifting,” said Joseph LaVorgna, chief economist for the Americas at Natixis and former chief economist for the National Economic Council under then-President Donald Trump.
Brief: Investors may be underestimating the need for “aggressive” monetary tightening from the Federal Reserve and other central banks to combat inflation, resulting in “significant risks” for markets, according to Bridgewater Associates. Following hawkish comments from the Fed Chair Jerome Powell last week, investors have brought forward expectations of tightening, pricing in five quarter-point rate hikes this year. Further out, however, they’re predicting fewer rate increases, anticipating the Fed will end the cycle with the policy rate at about 1.65% and long-term inflation expectations anchored around 2%. Consumer prices surged 7% in December from a year earlier, the fastest pace since 1982. “The markets are discounting a smooth reversion to the prior decades’ low level of inflation, without the need for aggressive policy action -- that it will mostly just naturally happen on its own,” the world’s biggest hedge fund said in its 2022 outlook. “We see a coming clash between what is about to transpire and what is now being discounted.”
Brief: PayPal Holdings Inc. shares were set to sink to almost the lowest level since the pandemic’s onset, joining the likes of Peloton Interactive Inc. and Netflix Inc. in a post-earnings selloff. These companies have given back most of their multi-fold gains as demand for their services during Covid-19 lockdowns and mobility restrictions have quickly come to an end. PayPal’s December quarter numbers showed the same, prompting investors to dump the stock and hand losses of 19% in premarket trading. If these levels hold, it will be the stock’s worst day on record. Total payments volume climbed just 23% in the final three months of last year, the smallest increase in two years and fell short of analyst expectations. The results dragged down the share price of rival Block Inc., formerly Square Inc., by 8% and Affirm Holdings Inc. by 3% in premarket trading.
Brief: Thanks to the historic stock market rebound from pandemic lows, affluent 401(k)-holders and savvy investors in the U.S. enjoyed double-digit returns from stocks over the past two years. But not for the majority of Black Americans. Only 34% of Black American households owned equity investments, as compared with 61% of white families, according to Federal Reserve Board’s most recent survey in 2019. The average value of stocks Black Americans owned amounted only to $14,400, nearly a quarter of what their white peers held, the data said. “Because Black households are less likely to be invested in the stock market and on every level less likely to be engaged in the financial system, they not only entered the pandemic with large gaps, the likelihood is that we are going to see some of these gaps widen coming out of the pandemic,” said John Lettieri, the Economic Innovation Group’s president and CEO.
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