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Brief: There’s a whole class of Wall Street pundits whose lone job, it often seems, is to bash stock investors for assigning irrational valuations to companies. Rarely has the chatter from this crowd been as loud as it was in the Spring of 2020, when the pandemic was raging and the economy was collapsing and stocks were suddenly rebounding and nothing seemed to make any sense. It turns out in the end that they were right. Valuations were wildly off. But in exactly the opposite way that they had proclaimed they’d be. Corporate profits have roared higher in such a spectacular fashion that those valuations -- when analyzed against the actual earnings reported a year later -- were almost 20% cheaper than analysts thought when investors began piling into the S&P 500 in April 2020.
Brief: Stocks fell in early trading Monday, amid worries about rising coronavirus infections in the U.S. and around the globe, as well as geopolitical concerns out of Asia. The S&P 500 index fell 0.5% as of 10:05 a.m. Eastern. The Dow Jones Industrial Average lost 0.7% and the Nasdaq composite fell 0.8%. The Russell 2000 index of small company stocks was down 1.2%. Shares of Tesla fell more than 3% after the U.S. government announced a formal investigation into the company's automated driving features, following a series of collisions with parked vehicles. Data out of China showed the global coronavirus pandemic continues to hurt economies around the world. Chinese industrial production and retail sales both rose last month, but at a far weaker pace than what economists had expected.
Brief: Big Wall Street banks have started enforcing stricter mask and vaccine requirements for staff, sometimes communicating them behind the scenes, in an effort to combat coronavirus infections in their offices while avoiding a fierce national debate about individual rights, sources at the banks and consultants who work with them told Reuters. Specifics differ, but many big banks have tightened up policies or pushed back return-to-office dates from just a month ago. Now, Citigroup Inc and Morgan Stanley have the toughest rules at their New York headquarters, where staff entering must be vaccinated. PMorgan Chase & Co and Goldman Sachs Group Inc have not mandated vaccines the same way, but both require unvaccinated workers to wear masks and get tested at least weekly. Bank of America Corp will only allow vaccinated staff to return to its offices in early September, while encouraging other employees to get inoculated.
Brief: The Covid-19 pandemic has clearly mattered to our daily lives and the well-being of the global economy. But the impact on financial markets has been less straightforward. The response from financial markets to Covid-19 has been mixed. Equities appear to have looked through the economic consequences of the virus. Last year, the Covid-19 crisis triggered one of the deepest recessions in history which saw global growth contract by 3.6% year-on-year. After the initial selloff in stock markets, global equities - as measured by the MSCI AC World index - went on to deliver a 15% return in 2020. Over the past decade, with the rise of the technology sector, global growth stocks have outperformed their value peers. But the difference in returns between growth and value was stark in 2020, with the MSCI AC World Growth index beating the value equivalent by a historical record of 33%.
Brief: Since putting in a pandemic low on March 23, 2020, Nasdaq 100 futures have posted a stunning 125% rally in the subsequent 17 months, making an all-time high on July 26, 2021. This gain far outpaces the 100% rally of the broader S&P 500. The Nasdaq’s out performance has been generally attributed to several factors. The primary reason given for the initial gain was a belief that the pandemic and post pandemic economy would rely heavily on technology as work from home and remote communication became paramount. There was also the issue of interest rates. Technology companies tend to have a strong inverse correlation to interest rates because of commonly used discounted cash flow models. In short, the lower interest rates are today the more attractive the growth and technology sector becomes because of optimistic projections of future earnings.
Brief: The stock market continues to ignore worsening headlines on the COVID-19 Delta variant front and climb to fresh records. But given a shift in tone lately from corporate America, perhaps investors should be on high alert. Companies that had been bullish on the economic recovery from the depths of the pandemic are becoming increasingly cautious as the variant spreads. Here are three household names that have recently warned of a financial impact from the COVID-19 Delta variant. Investors may be ignoring the commentary below, but it could prove to be an earnings headwind in the current quarter — one that isn't priced into stock prices.
Brief: A surge in merger activity propelled profits at the U.K.’s largest law firms despite a collapse in the global economy triggered by the coronavirus pandemic. A year that started with virus-related uncertainty gave way to record deal activity that helped four elite London firms, known as the Magic Circle, report bumper financial results. Transactional lawyers around the world advised on over $4 trillion worth of deals in the year ending April 31, according to data compiled by Bloomberg. Freshfields Bruckhaus Deringer led the way posting a 5% revenue boost to 1.6 billion pounds ($2.2 billion) for the financial year -- much of the growth was attributed to their work on eye-catching deals. Those included AstraZeneca Plc’s $39 billion acquisition of Alexion Pharmaceuticals Inc. and the sale of Cazoo for $7 billion, one of the largest ever SPAC deals.
Brief: U.S. consumer sentiment dropped sharply in early August to its lowest level in a decade as Americans gave faltering outlooks on everything from personal finances to inflation and employment, a survey showed on Friday. The University of Michigan said its preliminary consumer sentiment index fell to 70.2 in the first half of this month from a final reading of 81.2 in July. That was the lowest level since 2011, and there have been only two larger declines in the index over the past 50 years. Economists polled by Reuters had forecast the index would remain unchanged at 81.2. U.S. stock market indexes slipped immediately after the report was released, while the price of gold, a safe-haven investment, gained ground. U.S. Treasury bond yields hit session lows. Economic growth is still expected to grow this year at its fastest pace in four decades after falling into a brief recession in 2020 caused by the coronavirus pandemic.
Brief: Philippine stocks tumbled the most in more than a year on fears coronavirus infections will rise further and spur the government to extend a two-week lockdown affecting the capital and other areas. The Philippine Stock Exchange Index plunged 3.6% to 6,320.19 at 1 p.m. in Manila, its lowest close in more than a year. Investors dumped key blue chips -- including SM Investments Corp. and unit SM Prime Holdings Inc. -- after the gauge had held a moderate decline for much of the day. “I was expecting a downward movement, but not this drastic,” said Manny Cruz, strategist at Papa Securities. “The fear is infections will further escalate, raising prospects the lockdown will run longer.”
Brief: CNBC’s Jim Cramer said Thursday short-sellers have helped propel Wall Street’s robust rally from its pandemic-driven sell-off, calling the cohort of bearish investors the “secret ingredient” to the stock market’s success since late March 2020. “Just like ordinary investors will throw in the towel and sell when their favorite stocks get obliterated, short-sellers throw in the towel when their favorite targets go up too much,” the “Mad Money” host said, shortly after the Dow Jones Industrial Average and S&P 500 yet again closed at record highs. “The invisible cover of their defeat is evident every day in this market and it’s something we don’t talk about enough—how the heck do you think we’ve managed to go six straight months without a 5% decline? Capitulating short-sellers are like a fifth column supporting the bulls, even if they’re not doing it by choice,” he added.
Brief: It’s been a year that many of us would probably prefer to forget, but for asset managers the pandemic has turbocharged many underlying technology trends that were already in place before anyone had ever heard of Covid-19. The migration of more and more activities onto the cloud has been underway for years, of course – propelled above all by the sheer volumes of data which asset managers now juggle daily in order to shape their investment decisions. But those firms which had already shifted many of their activities into cloud-based solutions well before the pandemic hit last March found the transition to working with a dispersed workforce much easier – and faced less disruption compared to those heavily reliant on on-premise infrastructure and in-house teams of IT staff. John Kain of AWS, the world’s biggest cloud provider, says the charge into the cloud by the industry has been led by those firms which rely on the most data intensive investment strategies – above all the quant funds – but he thinks there is still plenty of room for overall growth as smaller firms and those with different strategies contemplate the long-term future of their tech stack post-pandemic.
Brief: For asset managers, the past 18 months have been a rollercoaster ride as the pandemic has forced them to embrace new ways of working. The implications have been profound as it has become more critical than ever for management firms to offer staff – everyone from portfolio managers to back office teams – the ability to access essential systems remotely. Many firms which were unable to do this initially have found themselves scrambling to update their technology. But the surge in home working has also fuelled mounting fears over cybersecurity. How can asset managers ensure their systems are as safe as they can be from the prying eyes of unwanted guests or from hackers seeking to disrupt or inject ransomware? “Businesses have increased the number of opportunities for cyber attacks massively, because every single device being used outside of traditional office network is of course an opportunity for cyber breach in essence we have decentralised cyber security,” says George Ralph (pictured), global managing director of RFA, an IT consultancy, which specialises in the alternative investment sector.
Brief: Industry commentators are forecasting that the UK economy will "comfortably" recover to its pre-pandemic levels by the end of the year, after a strong June reading that took year-on-year Q2 growth to 4.8%. The figure, reported by the Office for National Statistics (ONS) this morning (12 August), includes a 1% rise in June and is "strongly ahead" of US and European equivalents, according to Charles Hepworth, investment director at GAM Investments. He called the figures "a stunningly strong rate of growth compared to other western economies on a like-for-like basis", but warned this "record pace" is unlikely to continue now that coronavirus restrictions have been largely factored in to growth forecasts. "Consumer expenditure drove the increase over the second quarter despite a rise in coronavirus infections and a lot of that spending will likely cool from these levels," he said.
Brief: From travel to technology, employers across the globe are offering four day weeks as incentives to woo workers after the coronavirus pandemic upended their working patterns. Debate over the so-called 'Scandinavian model', which holds that productivity will rise if working hours are dropped, is not new but it has gained traction during the COVID crisis not only among companies but also the public sector and politicians. In Europe, Spain's left wing government is considering its own version to help its economy, while public administrations in Denmark and Iceland have already adopted 4-day weeks. With retail and hospitality now among the sectors struggling to attract and retain staff as economies recover from the crisis, many companies are introducing shorter weeks, the president of global staffing group Adecco said."After the (coronavirus) crisis, people became more aware their working conditions weren't always the best ... Now they're thinking, we don't want to sacrifice our personal life," Adecco's Christophe Catoir told Reuters.
Brief: The boom in online retail during Covid-19 is substantially reshaping the UK’s consumer sector, but Toscafund Asset Management’s Savvas Savouri believes e-commerce sales may peak sooner rather later as restrictions finally end. In a market commentary on Wednesday, Savouri – chief economist and partner at Martin Hughes’ hedge fund behemoth Toscafund – reflected on how the coronavirus pandemic sent online sales soaring as the UK entered a protracted lockdown. However, looking ahead, he believes that multi-channel retail operators that offer both digital sales and ‘bricks-and-mortar’ stores may now have reached a point where their online offering has gone from a “disruptive competitor” to their physical presence to a “stable companion”.Observing the rise in internet shopping, he noted that as recently as 2008, less than one-twentieth of UK retail sales were online; within a decade, that number had swelled to a fifth, as a result of online sales growing at an average of 20 per cent every year. But that 20 per cent levelled off towards the end of 2019 and into 2020, nearing what Savouri referred to as ‘retail internet penetration’ (RIP) – before spiking back up towards highs of almost 80 per cent UK’s first coronavirus lockdown in March 2020.
Brief: Macro strategies have advanced 7.82 per cent so far in 2021, according to data provider BarclayHedge, after managers posted a narrow gain of 0.19 per cent in July. In comparison, the broader Barclay Hedge Fund Index – which measures average industry performance across strategy classes – has risen almost 9 per cent year-to-date, BarclayHedge said this week. Macro managers take long and short positions across a wide range of markets and indices, including equities, bonds, currencies, and commodities, with bets shaped by their outlook on broader macroeconomic trends and events. Last year, the sub-strategy generated an annual return of more than 10 per cent. Despite macro hedge funds suffering the largest volume of investor outflows towards the end of the first half – allocators withdrew some USD5.57 billion from the sector in June, according to eVestment data – the outlook for managers remains positive.
Brief: While the damage wrought by the Covid-19 pandemic has been all-encompassing, research shows that it is women who have been disproportionately impacted. PWC's Women in Work 2021 research reports that women's job losses outpaced men's in 2020, with women forced to reduce their participation in the workforce due to the disproportionate burden of care. The findings point to a worrying reversal in progress towards gender parity in the workplace, prompting businesses across all sectors to reprioritise a recovery from Covid, which puts equality front and centre. Although discouraging, can these circumstances create a vital moment for change? And against this backdrop, what is the view from private equity, specifically? We know that the sector has historically had a reputation for being a less caring and socially inclusive place to work than many. Is this finally an opportunity for change?
Brief: U.S. stocks were off the highs of the day and the dollar weakened after data showed consumer prices increased at a more moderate pace in July, reducing concern about the timing of an unwinding of some of the stimulus that has helped the economy recover from the COVID pandemic. The S&P 500 and Dow Jones Industrial Average indexes climbed to records after data showed CPI rose 0.5 per cent in July after climbing 0.9 per cent in June. The tech-heavy Nasdaq 100 declined as investors rotated to cyclical shares from traditional growth favorites such as Amazon.com. The reaction was muted in the Treasury market, with yields lower on two-year notes and slightly higher on 10-year securities. Investor focus on U.S. price data comes as Federal Reserve Chair Jerome Powell and other officials discuss the prospects of unwinding stimulus that has helped the recovery from the pandemic. Chicago Fed President Charles Evans said he expects substantial further progress later this year on the central bank’s tapering intentions.
Brief: The FTSE 100 closed at an 18-month high on Wednesday, as stocks rallied around the world on stimulus hopes and easing inflation fears. The FTSE 100 (^FTSE) rose 0.8% to close at 7,220, its highest finish since March 2020. The index remains around 200 points off levels it was trading at before the onset of the COVID-19 pandemic. In Europe, Germany's DAX (^GDAXI) was up 0.3% and the CAC (^FCHI) rose 0.5%. Global sentiment was helped by signs that US inflation could be topping out. Consumer price figures published 1.30pm Europe time showed US prices growing at 5.4% in July. That was flat on the prior month and broadly in line with forecasts. "With US CPI having beaten expectation for most of 2021, it’s almost a surprise to see the numbers come out in line with expectations," said Mike Owens, a global sales trader at Saxo Market.
Brief: Stocks rose on Wednesday after inflation jumped, but not by quite as much as investors feared when stripping out volatile food and energy prices. The Dow Jones Industrial Average gained about 170 points, or 0.5%, to reach a new intraday record. The S&P 500 rose 0.1% to an intraday high. The Nasdaq Composite traded 0.45% lower.The 10-year Treasury yield turned flat following the CPI report, giving up an earlier gain and trading around 1.344%. July’s Consumer Price Index released Wednesday showed prices jumped 5.4% since last year, compared to expectations of 5.3%, according to economists surveyed by Dow Jones. The government said CPI increased 0.5% in July on month-to-month basis. But investors were concentrating on the core rate of inflation. CPI, excluding energy and food prices, rose by 0.3% last month, below the 0.4% increase expected. Core prices still jumped 4.3% on a year-over-year basis.
Brief: Investor confidence in Germany’s recovery dropped to the lowest level since late last year after a rise in infection rates stoked concerns over a possible tightening of pandemic curbs. ZEW’s gauge of expectations declined to 40.4 in August from 63.3 the previous month, with the institute’s President Achim Wambach warning of “increasing risks” to the economy. A measure of current conditions improved. Although more than half of Germany’s population is fully vaccinated, coronavirus infections in Europe’s largest economy are on the rise. The government has already tightened some travel rules and is set to discuss additional steps during a summit on Tuesday.
Brief: Slumping technology stocks briefly slowed the grind higher in U.S. equities, exposing the lingering concerns about the ability of the economy to weather less stimulus and rising COVID outbreaks. While the S&P 500 climbed to another all-time high, the Nasdaq 100 declined as Amazon.com slumped. Micron Technology led a decline in chip stocks, which are down for a fourth session. Energy shares rallied with oil. In Europe, the Stoxx 600 Index climbed for a seventh day.“The move lower in growth, especially the tech sector, may be two-fold,” said Dave Mazza, head of product at Direxion. “First, with the recent outperformance in the space, investors may be taking profits ahead of this week’s inflation data. Secondly, investors may be pricing in tapering by the Federal Reserve sooner then expected considering recent comments from officials.”
Brief: Global M&A activity saw a strong recovery in H1 2021, as dealmaking count and value are both set to reach or surpass the record highs of previous years, according to Pitchbook's latest Global M&A report. In total, more than 17,000 deals closed with a combined value exceeding USD2 trillion, as the bounce back from the pandemic-spurred lows in 2020 continued to pick up slack. Healthy stock market returns, optimistic executives, and cheap financing were all contributing factors to the deal bonanza, the report, which mapped M&A activity in the first half of the year, revealed. Moreover, the intense pace of IPOs and SPAC reverse mergers bodes well for global M&A activity overall.
Brief: European stocks inched higher on Tuesday, looking to break out from a cautious approach seen globally at the start of the week. The pan-European Stoxx 600 climbed 0.25% by late morning, with travel and leisure stocks adding 1.4% to lead gains while banks fell 0.6%. The cautious optimism in Europe reflects similar sentiment in Asia-Pacific, where shares mostly rose in Tuesday trade while South Korean game developer Krafton plunged in its debut. Worries about the impact of Covid on global growth continued to weigh on investor sentiment, with countries grappling with the spread of the highly transmissible delta variant of the virus.
Brief: During times of global turbulence, like the kind induced by the Covid-19 pandemic, cryptocurrencies may provide much-needed diversification to investment portfolios, according to a paper from researchers at the University of Bath. The researchers came to this conclusion after aggregating popular cryptocurrencies into nine equally-weighted portfolios based on the type of algorithm used in the blockchain of each currency, a methodology that gave them room to consider 553 cryptocurrencies in total. These categories included proof-of-work coins — popular mineable coins like Bitcoin and Ethereum — and proof-of-stake coins, a more energy-efficient alternative to PoW coins.
Brief: Hedge funds’ nine-month consecutive run of positive returns has been halted, with managers ending last month in the red as market volatility and renewed uncertainty over the impact of coronavirus variants. Hedge Fund Research’s main industry-wide benchmark, the HFR Fund Weighted Composite Index – which tracks the monthly returns of some 1400 single manager hedge funds across all strategy types – lost 0.60 per cent in July, its first down month since September 2020. The dent means hedge funds have now returned 9.45 per cent gain since the start of 2021. Before last month, the industry’s January-to-June advance – a rise of some 10 per cent – had been its best first-half performance since 1999, according to HFR data.
Brief: For the first quarter since the onset of the pandemic, the health of the UK’s Defined Benefit (DB) pensions schemes failed to improve, ending what had been four consecutive quarters of growth. However, it should be noted that funding levels remain far stronger than their pre-Covid levels, according to Legal & General Investment Management (LGIM). LGIM's Health Tracker, a monitor of the current health of UK DB pension schemes, found that the average1 DB scheme can expect to pay 98.2 per cent of accrued pension benefits as of 30 June 2021, the same figure recorded on 31 March 20212. The health of the UK’s Defined Benefit (DB) pension schemes had originally dropped as low as 91.4 per cent as of 31 March 2020, following the onset of the pandemic, having previously been at 96.5 per cent as of 31 December 20194. LGIM’s monitor has since shown a continuing improvement in each of the last four quarters, which has been brought to an end with the latest data.
Brief: Stocks fell Monday, losing some steam after rising to all-time highs late last week. Commodity prices tumbled as concerns over the coronavirus's spread resurged, with crude oil prices moving sharply to the downside. The S&P 500 fell as shares of oil companies including Occidental Petroleum (OXY), Apache Corporation (APA) and Diamondback Energy (FANG) dropped. The Dow also dipped, weighed down by a decline in shares of Chevron (CVX). U.S. West Texas intermediate crude oil futures (CL=F) dropped more than 4% at session lows Monday morning to hover around $65 per barrel, extending a more than 7.5% weekly decline last week. Brent crude (BZ=F), the international standard, also dropped. Other commodities also dipped Monday morning, including with copper, silver and gold futures each moving lower by at least 1%. Treasury yields fell across the curve, and the benchmark 10-year yield retreated to below 1.28%.
Brief: The S&P 500 is poised for its fastest 100% recovery in history and investors remain bullish on the US equity market but advise caution on the sustainability of such a rapid recovery. From its 20 March 2020 low point to 6 August 2021, the S&P 500 has risen 95% in under 17 months, according to data from FE fundinfo, well ahead of the pace of the current record recovery following the Global Financial Crisis, which took two years. While nothing is guaranteed, Juliet Schooling Latter, research director at Chelsea Financial Services, believes it is "highly likely" the previous record will be broken given the strength of US earnings combined with current monetary policy. "The difference between this crisis and post-GFC is that we have had faster and bigger amounts of fiscal stimulus which are helping us to recover faster," she explained. "The earnings growth is also extremely strong. People have been calling [it] another tech bubble because they have been focusing on share price charts for tech companies.
Brief: Goldman Sachs sees the U.S. labor market maintaining its momentum well into 2022. Economists at the firm led by Jan Hatzius lowered their year-end 2021 unemployment rate forecast slightly to 4.1% on Monday. For 2022, Hatzius and his team projects a 3.5% unemployment rate. If achieved, the unemployment rate would be at a 50-year low as the economy powers back from the COVID-19 pandemic. Employment at those levels in 2022 would bring the economy to full employment, Hatzius says. "We expect further solid job gains in the rest of the year. One reason is that labor demand remains very strong. We also see further scope for fairly quick job gains from additional reopening, the expiration of federal unemployment benefits, and the return of in-person school," explains Hatzius.
Brief: The first half of this year saw a total of 357 companies raise new capital through follow-on issues, raising £12bn in capital, according to investment bank Goodbody, which analysed stock exchange data. The figure is down from £17.3bn raised in H2 2020 and £17bn raised in H1 2020, but remains well above pre-pandemic levels, averaging £9bn each half year over the last decade. "In the face of unprecedented disruption, UK capital markets have proven to be an invaluable source of support for listed businesses," head of Goodbody's London office Piers Coombs said. "Through the backing of investors, management teams have been able to plot a course through the pandemic and protect jobs. Now, investors are backing UK businesses to build back better as they capitalise on new opportunities for growth."
Brief: The call from Morgan Stanley’s human resources office went out late Monday: Two vaccinated employees had Covid-19, and workers on the 14th floor of the firm’s Times Square headquarters should stay away until the area could be cleaned. But some staff missed the message and showed up Tuesday morning anyway. Others asked if the company would start mandating masks. For now, the answer was no. After all, you have to be vaccinated to be in the building. The episode, described by a person familiar with the matter, shows the swirl of confusion across Wall Street as banks summon employees back to their towers amid the spread of Covid’s highly transmissible delta variant. As the mutation shows its ability to jump between vaccinated people, executives are struggling on how to calibrate responses. Across an industry that was already split on returning to work, policies are diverging more than ever.
Brief: European markets were slightly higher on Friday as investors monitored a fresh round of corporate earnings and the global spread of the delta Covid-19 variant. The pan-European Stoxx 600 climbed 0.12% by mid-afternoon trade, with insurance stocks adding 1.4% to lead gains after strong earnings from Allianz, while health care stocks fell 0.8%. Shares in Asia-Pacific were also mixed in Friday’s trade as rising Covid cases continued to weigh on sentiment, while investors awaited the release of a key jobs report from the U.S. Labor Department. Stateside, U.S. stock futures were little changed in early premarket trade as investors reacted to a better-than-expected July jobs report from the U.S. Labor Department. Nonfarm payrolls increased by 943,000 for the month while the unemployment rate dropped to 5.4%.
Brief: Companies from Goldman Sachs Group Inc. to Havas SA are hoping the way to their employees’ hearts is through their stomachs as they try to lure staff back to the office. At Goldman Sachs, free breakfast, lunch and ice-cream are part of the pitch to convince employees from London to Hong Kong and New York to leave the comfort of their homes, where some have worked since March 2020 when the pandemic took hold. One of the most vocal proponents of bringing everyone back even allows those meals to be enjoyed on Plumtree Court’s landscaped roof garden — once reserved for clients and visiting royalty. “Food is playing a much more central part in office life and businesses are using their food offers to try and influence behavior,” said Robin Mills, U.K. and Ireland managing director at catering company Compass Group Plc. “We are now fully part of these reopening conversations and part of this new world as companies think about how to get people to come back.”
Brief: BlackRock Inc. and Wells Fargo & Co. are pushing their return-to-office plans back a month to early October, as Wall Street grapples with rising Covid-19 rates across the U.S. BlackRock is allowing workers to choose whether or not to come into U.S. offices through Oct. 1, according to a memo. Wells Fargo, with almost 260,000 employees, will now begin bringing back staffers who have been working remotely starting Oct. 4 rather than Sept. 7, as previously announced, according to an internal memo Thursday from Chief Operating Officer Scott Powell. The shift from both the world’s largest money manager and the firm with the largest workforce of any U.S. bank signals the financial industry is rethinking its return-to-office plans as the highly contagious delta variant sweeps across the country. While the biggest U.S. banks have so far stopped short of requiring their employees to be vaccinated, BlackRock has only allowed fully inoculated workers to come back.
Brief: There’s more money than ever betting that apartment rents are heading to new heights. Investors spent $53 billion on multifamily real estate during in the three months ending in June, the most ever for the second quarter, according to data from Real Capital Analytics. The spree extended a busy year for apartment investors that has included purchases by Blackstone Group Inc. and Starwood Capital Group. It was also fueled by real estate money moving to housing from offices, hotels and malls, which have fared poorly in the pandemic. The influx of money has pushed prices higher and forced private equity firms to behave like the aggressive homebuyers in the frenzied housing market. Some investors are frustrated by current prices for apartment buildings. But many are raising their bids, waiving inspections and promising to close fast, with rising rents driving a flurry of deals.
Brief: The Covid boom times are coming to an end for tech companies. After reporting eye-popping growth throughout 2020 as more people turned to technology to work and play during pandemic lockdowns, companies from Apple to Roku are now warning the party is just about over. In general, tech companies beat earnings expectations for the second quarter, but investors still punished shares following weaker than expected guidance for the current quarter. Google’s parent company Alphabet was the most notable exception, however. To be clear, the biggest tech companies still expect to show nice growth in the third quarter, but warned they have lapped the hyper growth they saw last year. And it all appears to be a result of people turning away from tech and getting back out into the real world as the economy opens up and more folks get vaccinated.
Brief: Public plans tracked by eVestment reported 109 commitments to private markets real estate investments totalling USD7.5 billion in 2Q, a 9.5 per cent increase from the previous quarter, according to the just-released June 2021 Private Markets Monitor. Average commitment size also increased to USD68 million from USD64 million. These 2Q 2021 real estate commitments still represent a drop of 10.1 per cent compared to 2Q 2020, as some of the most severe months of the pandemic unfolded and the extent of the disruption in the current and future state of the real estate business was unknown. But the rebound in Q2 2021 reflects an overall strengthening of and confidence in real estate as an investment as normal work, shopping and entertainment activities resume.
Brief: U.K. Prime Minister Boris Johnson issued a rallying cry for the nation’s institutional investors to plow money into British companies and create a “big bang” that powers a recovery from the pandemic. In a joint letter with Chancellor of the Exchequer Rishi Sunak, Johnson called for “hundreds of billions of pounds” to be unleashed into longer-term U.K. assets, including “pioneering firms and infrastructure.” That would help secure better retirements for pensioners and support an “innovative, greener future,” he said. The language evokes the “Big Bang” of the 1980s, when Margaret Thatcher’s liberalization of finance made London the unrivaled financial hub of Europe. It’s also Johnson’s answer to criticism that his plans to bridge income gaps between London and the rest of the nation are too vague. Relying on investors would avoid further strain on the Treasury, which borrowed at record rates during the Covid-19 pandemic.
Brief: Increased investor concerns about China and a widening vaccination gap will keep pressure on emerging-market assets relative to their developed peers, according to some market participants. China’s sweeping clampdown of its technology sector at a time when its economy is slowing has helped push a global gauge of emerging-market shares to a 17-year relative low against their developed-market peers. The spread of coronavirus variants has also weighed, with vaccine rollouts in developing nations lagging those in the likes of North America and Europe. U.S. and European stock markets are expected to continue to outperform, as advanced economies rebound, travel resumes and vaccinations creep closer to herd immunity.
Brief: Despite seeing growth significantly impacted during the pandemic, the vast majority of UK startups are now confident about the next 12 months. That's the key finding of a survey of startup opinion, conducted by Angel Investment Network (AIN), the UK’s largest online angel investment platform. In the largest study it has ever conducted, AIN surveyed the views of 645 UK startups 18 months after the pandemic first hit. Despite 59 per cent seeing growth negatively impacted, nearly three quarters are now optimistic about the next 12 months (72 per cent), with 42 per cent very optimistic – up from 23 per cent when a similar survey was conducted at the start of the pandemic. Of those who have raised in the past year, 54 per cent reported being negatively impacted with investors pulling out. Meanwhile 68 per cent reported delaying fundraising as a result of Covid.
Brief: Investors waiting for a heads-up from the European Central Bank on the future of pandemic bond-buying in September will probably be disappointed, according to Governing Council member Martins Kazaks. With nearly 600 billion euros ($713 billion) left to spend and the program running at least through the end of March, it would be much too early for a decision on whether to extend or phase out purchases, he said in an interview. Coronavirus infections are rising again across much of the region, threatening new restrictions that could jeopardize the recovery.
Brief: Vanguard Group Inc. is offering $1,000 to employees who get vaccinated by October, according to a person familiar with the matter. The asset manager is extending the payments to all workers who can prove they’ve gotten a Covid-19 vaccine, even if they were inoculated before the firm extended the offer. A Vanguard spokeswoman confirmed the company is offering an incentive. “We are offering a vaccine incentive for crew who provide Covid-19 vaccination proof,” she said in an emailed statement, adding that the company rewards employees “who have taken the time to protect themselves, each other, and our communities by being vaccinated.”
Brief: North American markets moved up on the first day of August trading in Canada, even as concerns mount around rising COVID-19 case counts in the U.S. Scott Guitard, senior vice-president and portfolio manager at Fiduciary Trust Canada, said it was a typically slow start to the summer month in terms of volume. However, he said markets managed to continue upward movement on Tuesday thanks to second quarter earnings that beat expectations last week, and the belief that the U.S. is prepared to weather the Delta variant of the coronavirus.
Brief: The Delta variant is wreaking havoc on companies’ return-to-office plans. Uber, Apple and Google are among the latest to push their return dates back by a month – from September to October. Employment website Indeed took it one step further, announcing its employee return-to-office date is now Jan. 3, 2022. “Health risks are at a peak these days because of this pandemic, and we’re still learning about what’s going on every single day,” Paul Wolfe, Indeed’s Senior Vice President of Global Human Resources, told Yahoo Finance. “Our guiding principle through the entire pandemic has been the health and safety of our employees.” Commuting time and costs are a top concern for workers dreading a return to the office, according to a recent Indeed report published in July
Brief: Never mind banker burnout, return-to-office headaches, and new pandemic waves. A simple reality stands out for the biggest global investment banks: they’re minting money like never before. As the dust settles over earnings season, a total profit of more than $170 billion from a dozen of the biggest firms in the past four quarters shows how far the industry has come from the frazzled early stages of the pandemic. JPMorgan Chase & Co. was the standout, earning the equivalent of $131 million a day. A string of trading wins certainly helped the sector in the early days of Covid-19, and as last year’s market volatility faded, investment bankers were ready to fuel the boom in takeovers and fundraisings via special purpose acquisition vehicles.
Brief: Clorox Co. plummeted the most in more than two decades after forecasting a sales decline in 2022 as pandemic-fueled demand for its cleaning products wanes. The maker of disinfecting wipes and Glad trash bags posted fourth-quarter sales of $1.8 billion, missing the lowest analyst estimate. With consumers reallocating spending amid a reopening economy, Clorox expects organic sales to decline by 2% to 6% in the current fiscal year. The stock fell 11% at 9:55 a.m. in New York on Tuesday, the biggest drop since 2000. The shares had already declined 10% in 2021 through Monday’s close. Clorox’s guidance is a warning to investors about the bumpy road ahead for consumer-products companies that enjoyed a boom during the onset of the pandemic. The forecast reflects consumers’ new priorities, which now more closely resemble pre-pandemic trends as they spend less time at home and offices and businesses reopen.
Brief: Laura Pollock’s Third Street Partners launched its lift-out business 18 months ago, just before the pandemic began. “The pandemic has created an opportunity for individuals to reflect on what do they want their career to look like,” Pollock told Institutional Investor. With that comes opportunity for an executive search firm like Third Street. Its lift-out business involves facilitating an entire investment team’s next career move. Third Street acts as a “professional matchmaker,” as Pollock puts it, finding teams that would be good fits for existing asset managers — or that would do well if they spun out on their own.
Brief: Two days a week working from the office is expected to become the new normal as businesses adapt to the fallout of the coronavirus pandemic. With millions of employees already working from home, big firms are adopting a three days at home, two days in the office approach, reports the Mail Online. Several employers have already agreed the changes, while the Institute of Directors said two thirds of business leaders will allow remote working to continue. The institute’s director of policy Roger Barker said the pandemic had led to changes to the working week “greater than radical reform or regulation ever could have”. A recent YouGov survey found just one in five bosses will ask all staff to come in five days a week after the pandemic.
Brief: Investors may want to start August by lightening up on the reopening trades. Longtime market bear David Rosenberg warns surging Covid-19 delta variant cases paired with the culmination of fiscal stimulus will crush stocks tied to the economic recovery. “We have to be prepared here for the economy to sputter in the next several months,” the Rosenberg Research president told CNBC’s “Trading Nation” on Friday. “You don’t have to basically abandon the stock market, but I definitely would not be in the value reflation cyclical trade.”
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