Our feature this week from Gill Wadsworth focused on the UK’s autumn budget that proved to be exactly the non-event that the market wanted.
James Lynch, investment manager at Aegon Asset Management, says: “The market and the government both wanted this budget to be a non-event and it delivered on the low expectations. While the Chancellor was speaking it became clear it was going to be light on policy, a bit more tax on gambling, landlords, and banks and a bit of an energy give away.”
Over at Schroders asset managers were equally underwhelmed, with James Bilson, Global Fixed Income Strategist, describing the Budget as “uneventful”, although he noted this was “exactly what the bond market wanted to see”.
However, for those seeking change, this week’s US mid-terms elections have provided quite enough change. Thomas Hempbell, Senior Economist at Generali Investments, and Vincent Chaigneau, Head of Research at Generali Asset Management have commented: “In a sweeping victory in the US midterm elections, Democrats secured majorities in both the House of Representatives and the Senate.”
However, the pair write that the short-term policy implications are likely to be limited. “Markets’ main concern is that AI regulation could tighten and the buildout of AI infrastructure could slow. These concerns are also reflected in the initial decline in Tech stocks and the US dollar following the results. The broader appetite for risk, however, seems slightly stronger following the results.”
The first of our two In My Opinions this week comes from Sean Peche, Founder and Portfolio Manager at Ranmore Fund Management, who references those very tech stocks, writing that the World Index is close to its all-time highs, “that’s only because of the influence of the very large technology companies, Microsoft and Nvidia alone generated 116 per cent of the World Index’s Q3 performance – an index of almost 1,300 companies. Below the surface “breadth” is “weak” with more index constituents hitting 52 week lows than 52 week highs.”
Peche argues that the good news is that these lower prices can provide great opportunities.
Our second In My Opinion this week focuses on the emerging markets, with Hamid Asseffar, Founder at T50 Capital, writing that emerging markets are often treated as a single asset class.
“In reality, they are dozens of economies, each with its own fiscal policy, banking system and stage of capital market development. Yet for many institutional investors, access to them runs through a narrow set of channels, and those channels tend to lead to the same places.”
Asseffar believes that the gap between emerging market opportunity and institutional allocation is not only a question of appetite.
“It is a question of plumbing: index coverage, market accessibility constraints, and operational access constraints such as convertibility and settlement that lag market development, local capital markets that need deepening, and investment structures that make long-term commitments impractical at scale.”
Beverly Chandler, Managing Editor, Institutional Asset Manager
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