Market Talk

Investors have used real-time data that track movements in market and economic sentiment for years as a supplement to traditional indicators such as purchasing managers indexes and national statistics. In the Covid-19 environment, these high-frequency alternative data are playing a much bigger role in anticipating market movements. The pandemic has sent markets lower and then higher with unprecedented swiftness, leaving investors who waited for official figures in the dust.

High-frequency data have become indispensable in detecting labour market and consumer sentiment trends. These two segments of the economy had been driving growth before the pandemic and were then hit hardest. Aviral Utkarsh, multi-asset strategist at NN Investment Partners, explains in our latest Market Talk podcast how high-frequency alternative data have become part of our investment process and what this information is telling us now.

Sustainable credit is here to stay. With pressure from stakeholders increasing in the wake of the Covid-19 crisis, companies with a long-term focus must build sustainability into their business strategy or risk irrelevance. How can we determine which companies are genuinely contributing to a better world, and which are simply going through the motions?

In our latest podcast, Annemieke Coldeweijer, co-lead portfolio manager sustainable credit, discusses how the Covid-19 crisis has changed the sustainable credit landscape, how to assess whether companies are truly sustainable, and why we’re committed to engagement over exclusion. “Exclusion alone is not enough,” she says. “It’s by starting that dialogue, identifying the companies with positive trends and positive momentum, that we can make a difference in our portfolio.”

The euro/dollar exchange rate is at its highest level in two years. On the euro side, the speed and coordination of the European policy response to the pandemic have buoyed investor confidence. On the dollar side, increased supply and a rebound in investor sentiment have weakened the currency. Marc Franklin, head of flexible multi asset, explains in our latest podcast how this shift has forced investors to rethink their portfolios for the coming months. He explores why we’re more positive on emerging markets debt and precious metals in light of the dollar weakness, how euro appreciation can act as a headwind for European equities, and whether it’s safe to view these currency developments as a fundamental shift.

The economic recovery on both sides of the Atlantic hangs in the balance this week. EU leaders continue to negotiate the shape of the European recovery fund, while Congressional leaders in the US are bringing their proposed rescue packages to the table. In the US, where virus infections continue to hit new highs week after week, economic indicators look less than promising, and current fiscal support measures are set to end in the coming days. Meanwhile in Europe, Germany and France face tough opposition in gaining approval for a sizeable rescue package.

Still, as Ewout van Schaick explains in our latest podcast, our current asset allocation reflects our belief that EU leaders will ultimately commit to a comprehensive recovery fund. “The most important steps towards EU unity have always needed a crisis moment and tough negotiations. It’s only after a heated debate that we make the best decisions.”

With the shift to virtual annual general meetings (AGMs) amid the Covid-19 crisis, companies and investors alike have had to adjust their expectations and behaviour. In many cases, investors have been limited to submitting questions and voting only in advance, with no opportunity to change their minds or ask follow-up questions based on the company’s responses. Meanwhile, the engagement focus has shifted as investors have pressed for answers on treatment of stakeholders and have demanded clear justification of remuneration decisions. In our latest podcast, senior responsible investment specialist Faryda Lindeman explores the implications of the shift to virtual AGMs and virtual engagement, both now and in the future, and assesses how investors can maximise their influence in this new reality.

The fast-growing alternative credit space is known for its illiquid nature and apparent complexity, but investors who take the time to explore the asset class can find themselves richly rewarded. With a wealth of available solutions to match any combination of liabilities and a wide variety of duration types, alternative credit offers attractive yields and long-term stable cash flows – also during market downturns. In our latest podcast, Niels Bodenheim, head of alternative credit, explains how investors can get the most out of this complex asset class and where he believes the market is still untapped.

At the end of an impressive second quarter marked by strong support from fiscal and monetary policy, the market focus has returned once again to virus developments. Infection numbers in the southern US and in several emerging markets are increasing at a record rate amid stalled re-openings and renewed lockdown measures. The big question is how this development will affect consumer sentiment: if rising fear leads consumers to delay spending, this could dash hopes for a V-shaped recovery. In our latest podcast, Ewout van Schaick explains why we’re opting for corporate credit over equities in the current environment, where we see risks of an economic plateau, and how the upcoming November elections could shape market expectations.

Market observers have been keeping a close eye on short-term factors such as market dynamics, sentiment and investor behaviour in the past three months. Meanwhile, the corona crisis has not gone away and the economic impact is only just starting to be felt, says Ewout van Schaick, head of Multi Asset at NN Investment Partners.

Joining Ewout in our latest podcast is Marco Willner, who became NN IP’s head of investment strategy in April. His first order of business was to formulate a medium-term outlook that envisions the possible futures that lie ahead in the coming two years. He maps out two boundary scenarios, one in which the economy recovers quickly and one in which it heads to a prolonged stagnation. Seven factors will push the actual outcome one way or the other, he explains.

After three months of gains that brought markets almost back to where they were before the Covid-19 rout in March, things suddenly changed last week. Worsening virus figures in some parts of the US spooked markets, just as the economy in other areas was reopening. Fed Chair Jerome Powell’s downbeat message on the outlook for the US economy added insult to injury and the markets took a dive. In our latest podcast, Ewout van Schaick explains that although volatility may remain elevated and there may be weakness in the short term, the positive factors that have been driving the markets are still in place.

Markets have staged a tremendous recovery over the past couple of months, largely predicated on assumptions of a strong V-shaped recovery and bolstered by improving virus data. Infection growth continues to decline as countries reopen, while early vaccine trials have delivered positive results. Still, the threat of a second wave hangs in the air and there is no certainty that any vaccine will be effective, making it difficult to be more than cautiously optimistic about the timetable for economic recovery. In our latest podcast, we spoke with Ewout van Schaick and Mark Belsey about what we can expect in terms of vaccine development, the likelihood of a second wave, and why, despite the multitude of unknowns, we’re increasing our risk-on stance in our multi-asset portfolios.