Top Investment Content from February 2022
The Russian invasion of Ukraine has wide-ranging short- and long-term repercussions, with first considerations being given to the humanitarian crisis unfolding. Markets can be extremely dispassionate at a human level, and at first glance, their focus seems to be on the implications of sanctions on potential banking and corporate ownership issues, through increased EU defence spending, to the likelihood that central banks may need to factor that inflation stays higher for longer given the potential disruption to energy and commodity markets. Central banks are faced with the dilemma of considering rate hikes to counter both existing inflationary pressures and ones exacerbated by the crisis, in an environment that may see global GDP growth estimates reduced.
The Savvy Investor Content Team presents some of the top institutional investment content uploaded during February 2022. Due to the timing, the crisis did not feature in the majority of papers, and whilst geopolitical considerations and their ramifications will remain top of mind for some time, most of the issues addressed in this month's selection aren't going away anytime soon either. Among the highlights are ESG and climate transition issues from McKinsey & Company, State Street's Digital Digest, portfolio construction considerations from Two Sigma, and Aswath Damodaran's piece on large-cap U.S. tech stocks.
Bridgewater Associates notes that we are now in a rate tightening cycle, a period that is not always good for equity markets. They analyse the key drivers of equity bear markets and offer suggestions as to how to manage through it.
StoneShot suggests that asset managers need to focus on the personalisation and relevance of their marketing material, with information that is tailored towards specific needs, if their marketing material is to resonate and engage.
Two Sigma constructs, via a machine-learning model, a thematic equity portfolio likely to offer superior returns in high inflation times, while underperforming when inflation is low.
The inaugural issue of State Street’s Digital Digest delivers a collection of their best, most recent and interesting thought leadership articles on most things digital, and how they intersect with aspects of asset management.
In this award-winning paper, the authors investigate periods of deep value, occasions in which the valuation spread between cheap and expensive securities is especially wide relative to its history. They find that these episodes are characterised by particularly high future returns to ‘buying cheap and selling dear’ securities.
State Street investigates the process of investing in companies defined as ‘pure play’ climate solutions. Given that decarbonisation is likely to accelerate in coming decades, it is equally likely that climate solutions companies should outperform.
In this McKinsey paper, the authors investigate the economic metamorphosis necessary to meet net zero emissions, and encapsulate the changes in demand, capital spending, cost and jobs that will be required out to 2050.
This Sustainability Yearbook from S&P offers insights into some of the most critical challenges the world is facing. It offers a comprehensive insight into corporate sustainability, while also providing an outlook into upcoming ESG issues.
Aswath Damodaran, Professor of Finance at the Stern School of Business at NYU, assesses the FANGAM stocks (Facebook, Amazon, Netflix, Google, Apple, and Microsoft) to see whether – following recent market setbacks – these stocks are still worth investing in, and what lessons might be learnt from recent price action.
Wilshire investigates the Alternative Income universe as a potential alternative to traditional fixed income and source of income in a yield-starved world.