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Column: How the Market Learned to Stop Worrying and Love the Blue Wave – Mike Dolan | Investing News

Column: How the Market Learned to Stop Worrying and Love the Blue Wave – Mike Dolan | Investing News

LONDON (Reuters) – Just about the only market consensus all year on next month’s U.S. election was that it would be volatile around the vote – but even that’s turning upside down three weeks before polling.

A narrow and disputed election result has been one of the main investor fears for months. Bank of America’s October global fund manager survey still had 60% of its respondents expecting the result to be contested – and three quarters said it was the outcome likely to cause most market disruption.

But with Democratic challenger Joe Biden’s consistent opinion poll lead since May widening into election day, bookmakers’ odds on a clearcut outcome and Democrat clean sweep of the White House and both Houses of Congress are narrowing.

Investment banks and asset managers, who have for decades argued markets would baulk at tax and spend policies and prefer congressional gridlock to curb any excesses, are now positively embracing the likelihood of a clean sweep for a Democratic Party expected to spend big and also raise wealth and corporate taxes.

With less than a month to go, Wall Street stocks are racing to record highs again and long-elevated implied volatilities of the S&P500 benchmark – the VIX ‘fear gauge’ and its November and December futures contracts – are draining to 6-week lows.

Opinion polls now put Biden’s lead over incumbent Donald Trump in double digits, almost twice September levels. Bookmakers in Europe put Trump as the 7/4 outsider, his longest odds of the campaign, and the Democrats are now favorite to take to take key swing states – Arizona, Florida, Michigan, North Carolina, Pennsylvania and Wisconsin.

Online market PredictIt puts the chance of a Biden White House as high as 66% and a Democrat clean sweep at 59%.

Far from running scared, the investment world

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Japan’s Suga to Order New Economic Stimulus as Early as November, Nikkei Says | Investing News

Japan’s Suga to Order New Economic Stimulus as Early as November, Nikkei Says | Investing News

TOKYO (Reuters) – Japanese Prime Minister Yoshihide Suga will order his government to compile extra economic stimulus measures as early as November, the Nikkei newspaper reported on Tuesday.

The move would signal the government’s readiness to deploy more support to cushion Japan’s economy from the significant disruption to consumers and businesses by the COVID-19 pandemic.

The measures could focus on supporting tourism and the restaurant industry from declining consumption, the Nikkei said.

There was no change to the government’s willingness to roll out economic measures if conditions required it, the top government spokesman said when asked about potential stimulus.

“As for financial matters, there is 7.8 trillion yen in coronavirus reserve funds remaining. We’ll utilise that balance first,” Chief Cabinet Secretary Katsunobu Kato told reporters at a news conference.

The government may also consider extending a “Go To Travel” initiative to subsidise domestic tourism as part of the stimulus, the Nikkei reported, without saying how it got the information.

Japan has already rolled out $2.2 trillion in fiscal stimulus in response to the health crisis, including cash payouts to households and small business loans that were partly funded via two supplementary budgets.

The government could decide in late December on a draft of a third extra budget to fund the expected measures, when it draws up plans for next fiscal year’s budget, the Nikkei said.

The world’s third-largest economy has started to recover from the impact the coronavirus has had on demand at home and abroad, including the hit to global trade that hurt Japan’s exports of cars and other manufactured products.

The government last Wednesday said economic activity likely stopped contracting in August.

(Reporting by Daniel Leussink; Editing by Chang-Ran Kim, Christopher Cushing and Tom Hogue)

Copyright 2020 Thomson Reuters.

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The Opportunities And Challenges Of Private Market Investing

The Opportunities And Challenges Of Private Market Investing

By Anna Davies

If you have a portfolio of stocks, bonds and other public assets, you may be intrigued by private market investing. Private market investing—a phrase often used interchangeably with private equity, venture investing and direct lending—offers robust opportunity, said Jay Karpen, investment manager at Whittier Trust.

“Companies are staying private longer and are going public at larger sizes than they were a decade ago,” he said. “Because of that, we’re seeing more investors who want to participate in the private markets.”

But while it may be easier than ever to participate in private markets, these investments require a different mindset and strategy than investing in public assets. “There’s more risk due to less disclosure combined with asymmetric information, illiquidity, execution challenges and manager risk,” said Karpen, adding that connections to opportunities, extensive due diligence and access to industry experts is essential.

Here are five tips to consider when you’re adding private market investments to your portfolio. 

An Extension Of Traditional Asset Classes 

Instead of thinking of private market investments as a brand new type of investment, consider it an extension of traditional asset classes, said Karpen. 

“Venture and growth equity have similar characteristics to small and mid-cap equities, private equity buyout is similar to large cap and direct lending is similar to fixed income markets,” said Karpen. 

That said, private market investing does bring additional considerations for investors. For one, the investment is illiquid, they are loosely regulated and there are often fees associated with private market investments. 

“You should expect to be compensated for these risks, otherwise it may not be worth it,” said Karpen.

The Right Partner Is Essential 

Since these investments are illiquid, and private equity vehicles generally require a large financial commitment, it’s important to take the time to understand the investment partnership,

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Fast Take: U.S. Consumer Inflation Muted, Just Don’t Buy a Used Car | Investing News

Fast Take: U.S. Consumer Inflation Muted, Just Don’t Buy a Used Car | Investing News

(Reuters) – U.S. consumers on balance paid only a little bit more for goods and services last month as supply chain disruptions that contributed to a bump up in inflation over the summer began to ease, a welcome respite for the millions who remain unemployed.

While that easing pressure on pinched consumers might offer a benefit to Republican President Donald Trump’s reelection prospects against Democratic challenger Joe Biden, it does come with a big “on the other hand” caveat: It is the latest sign of fading momentum in the rebound from this spring’s record-setting economic slump.

A bit of inflation typically is an indication of strengthening demand, an encouraging signal that consumers have reliable sources of income allowing them to contribute to growing an economy that hinges extensively on their spending. But with roughly 11 million still out of work and desperate for a new round of COVID-19 relief from Washington, September’s modest uptick in prices is no such signal.

Here’s Jefferies chief financial economist Aneta Markowska’s take: “After several months of above-trend gains, price pressures are finally normalizing. Both headline and core CPI increased by just 0.2% (month-to-month) in September, with the underlying details painting an even weaker picture.”

Graphic: September CPI: All about used vehicles https://fingfx.thomsonreuters.com/gfx/mkt/azgvojwqepd/Pasted%20image%201602602548532.png

In fact, she notes prices would have been unchanged but for one thing: The largest monthly increase in used car and truck prices since 1969. And with cash-strapped consumers increasingly reliant on their own transport to get to an on-site job, that’s no welcome development.

Food price increases, too, are moderating after a big run up in the spring, but where you eat makes a big difference.

If eating at home, as millions without work have no choice but to do, then food prices were lower for a third straight month.

If

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Economic Damage of New Corona Wave Likely to Be Less Dramatic: ECB’s Knot | Investing News

Economic Damage of New Corona Wave Likely to Be Less Dramatic: ECB’s Knot | Investing News

AMSTERDAM (Reuters) – The new wave of coronavirus infections is slowing economic recovery in Europe but is likely to have less impact than the first phase, Dutch central bank President Klaas Knot said on Tuesday.

“We have reasons to believe the second wave will have a less dramatic impact than the first, for which we were totally unprepared”, Knot told reporters.

“We know a bit more about the virus now, and businesses have learned to adapt where possible, for instance through online retail.”

But new restrictions to fight the new wave of infections are starting to slow growth, the Dutch member of the European Central Bank’s governing council added.

“Early indicators point at slowing growth. It is clear the second wave will dent the recovery, but it is too early to say by how much.”

Knot said the ECB would monitor the need to extend its own emergency support measures but would need more information on the economic outlook to make a decision.

But as new lockdowns and other measures spread throughout Europe, governments and central banks need to keep up their support for businesses and workers who are at risk of losing their jobs, he stressed.

“The costs of ending measures too soon are higher than the costs of maintaining them longer than necessary. And we must avoid ending them all at once. When the time comes, the exit must be gradual and predictable.”

The Dutch central bank on Tuesday said it would continue to give the largest Dutch banks extra room to keep credit flowing by lowering capital demands until at least the end of next year.

(Reporting by Bart Meijer, editing by Larry King)

Copyright 2020 Thomson Reuters.

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