Market Talk

Emerging markets have so far staged a seemingly synchronised recovery from the Covid-19 crisis, with spreads narrowing across the EMD sub-asset classes. Going forward, the recovery will become patchy as certain segments and regions benefit from opportunities for growth while others fall behind. In our latest podcast, Head of EMD Marcin Adamczyk and Client Portfolio Manager Bregje Roosenboom explore what the future could hold for emerging markets debt. They discuss how the upcoming US elections might affect the asset class, what developing trends are on the horizon, and why we currently prefer the high yield segment of the universe.

Global markets appear to be looking past the uncertainty that clouds the near-term landscape and focusing instead on the promise of a sunnier future. Two linked factors are driving this optimism: the prospect of US fiscal stimulus and the upcoming elections. Given the decreasing likelihood that Republicans and Democrats can reach a deal this week, the specifics of the stimulus package will likely depend on the next president and Congress.

In this week’s podcast, Ewout van Schaick explains why markets are pinning their hopes on Democrats’ regaining control of Congress as well as the White House, why such a blue wave could lead to fundamental regulatory changes in certain sectors and why investors shouldn’t discount the risk of a disputed election. He also explores the current situation in Europe and what it means for our multi-asset portfolios.

The tech sector has largely bounced back from its plunge in early September, which now appears to have been a technical correction rather than a fundamental shift. The ongoing second virus wave could provide new growth opportunities for cloud-exposed firms; conversely, positive vaccine news could lead to a rotation towards more cyclical sectors. In our latest podcast, Portfolio Manager Sustainable Equity Hans Slob explores the long-term case for investing in the tech sector and where we still see room for growth. He is joined by Principal Strategist Multi Asset Patrick Moonen, who explains why we tactically favour materials and certain industrial sectors in our multi-asset portfolios.

According to Portfolio Manager Jovita Razauskaite, 2020 has so far been a “one of a kind” year for green bonds. The market recovered quickly from a temporary dip in issuance in the initial phase of the Covid-19 pandemic and has not looked back since, hitting a new issuance record of EUR 67 billion in the second quarter. The volume is impressive but so is the diversity of issuers tapping the market.

In addition to AAA-rated sovereigns like Germany and Sweden launching their green bond programmes, the breadth of the corporate segment is steadily improving as more industrials issue green bonds. Despite the market’s impressive growth, demand is outstripping supply, resulting in oversubscribed new issues and spread compression. In this podcast, Razauskaite explores what is driving developments in this dynamic market and why the growth looks set to continue.

Positive drivers such as the strength of the IT sector and fiscal support in the US have stalled. Markets are again focused on the spread of Covid-19 and how soon we can return to normality. For the longer term, the development of an effective vaccine is the key question. Indications of pre-existing immunity in the wider population give cause for optimism, but the logistics of wide-scale distribution could be a hindrance. For now, markets are focused on infection patterns as the second wave spreads across much of Western Europe. Governments must choose between containing the virus and preventing the economic damage that renewed large-scale lockdowns would cause.

In this week’s podcast, Ewout van Schaick and Mark Belsey explore the current state of virus developments, the economic and market ramifications of further lockdowns, and what we expect for the coming months.

Signs indicate that the recent sell-off in tech stocks was a technical correction rather than a fundamental shift, though it remains uncertain whether the sector can resume its previous meteoric growth path. Meanwhile, the broader economy was buffeted by mixed signals as US unemployment ticked up and the Senate failed to pass a stimulus bill. In this week’s podcast, head of investment strategy Marco Willner explains why we took this opportunity to overweight equities, what a Democratic victory in the US elections could mean for the tech sector, and what it would take for markets to move higher from here. He also explores how investors can benefit from keeping a cool head and staying adaptable in these exceptional times.

For many investors, the strong sell-off in tech stocks late last week represented a long-awaited technical correction after months of euphoria. Others are questioning whether fundamental factors played a part, and whether the underlying fundamental drivers remain solid enough for the overall rally to continue. Meanwhile, central bank support remains strong, bolstering developed market credits, though risks still linger in the background.

September is usually the month when investors return to the markets after a summer break and when companies re-enter the new issue market. We talked to Alfred Meinema, Co-lead Portfolio Manager Euro Investment Grade at NN Investment Partners, and Rob Amenta, Senior Portfolio Manager US High Yield, based in NN IP’s New York office, about the outlook for the rest of the year. But we also took time to reflect on what has so far been an unprecedented year for credit issuance and learn why 2020 will almost certainly be entering the record books.

It may seem as if markets have been in a holding pattern for the whole of August, which was largely characterised by slow news flow and limited volatility. For Ewout van Schaick, who returned from his summer holiday to find a world that barely differed from the one he left, this is certainly the case. Still, with the approach of autumn and the ongoing threat of a second wave of Covid-19 infections, this period of relative quiet is unlikely to last. As Ewout explains in our latest podcast, several key factors will shape the coming months. These include the evolution of high-frequency indicators such as mobility and restaurant data, a renewed deal on fiscal policy support in the US, and concrete developments related to the virus itself.

Today Marco Willner, NN IP’s Head of Investment Strategy, joins us again to look at how the situation has changed since we talked to him in our 23 June podcast (Two medium-term economic scenarios help us navigate the uncertainty). Marco takes a fresh look at some of the factors that could push the economy closer towards our boundary scenarios – either a speedy economic recovery or a prolonged stagnation. Although the picture has become more mixed, growth and earnings numbers have been better than expected. The increasingly prominent theme for the medium term is the US elections – an event which will shape many of the other variables.