In this episode, Escala Partners CIO, Tracey McNaughton, shares her views on how the structure of the labour market has changed in the past three years and how this is sending mixed signals to the market. Inflation is proving to be hard to kill and this has implications for where central banks go next with interest rates.

(0:54) - The economic data out of the US are coming in stronger than expected. In particular, the labour market seems to be giving mixed signals.

(5:37) - Its not quite a James Bond storyline but inflation is proving to be a little hard to kill.

(12:37) - New terms are popping up all the time in finance and economics circles, you mentioned immaculate disinflation before.

(15:09) - China re-opening is here and the flow-on effects are being felt particularly in the tourism sector so far.

In this episode, Escala Partners CIO, Tracey McNaughton, shares her views on the latest interest rate decision taken by the Reserve Bank of Australia. She also discusses the challenging earnings season facing the US and offers some insight into what she is hearing from Escala's global fund managers on the ground.

(0:49) - We have just had the announcement from the Reserve Bank that they have decided to lift interest rates for a 9th consecutive time taking the official interest rate to 3.35%, the highest since September 2012.

(3:11) - We had a strong start to the year with good performance in January across every major market - emerging and developed. How are you seeing this?

(5:35) - Turning now to the US where interest rates were lifted again by the Federal Reserve for the 8th consecutive time. The view from the market is that we are almost done with this rate hike cycle.

(8:07) - On the earnings front, it seems there is a clear loss of momentum compared to prior quarters.

(11:38) - You have just completed "heat week" for international equities – are there any key messages that came out of that?

In this episode, Escala Partners CIO, Tracey McNaughton, shares her views on the challenging year that was 2022. "There is not a single person alive who can remember a year that we have just had because we have never had a year like 2022". There is reason to be more optimistic for 2023 however – the rate hike cycle is close to the end, China is reopening, jobs are plentiful, wages are growing, consumers are spending, inflation is easing. So what's to worry about?

(0:58) - Tracey 2022 was quite a year – it is almost hard to believe the kind of year we have had.

(4:10) - What about 2022 from an investment markets perspective?

(5:34) - Why did diversification fail?

(8:19) - How did the passive versus active battle work out? Did active managers redeem themselves in any way last year?

(11:05) - So what does 2023 have in store?

(13:22) - Tracey one of your favourite charts that you showed us in the morning meeting on Monday was the close relationship between the US equity market and the ISM manufacturing index. That is looking particularly interesting right now.

(16:16) - Just finally, earnings season is underway in the US with the banks reporting last week. What are you looking for in the coming weeks?

In this episode, Investment Analyst, Darragh Kennelly talks to Dawn Powell, Vice President, Responsible Investment at StepStone about the opportunities and challenges of ESG integration in private markets. They go on to discuss impact investing and the broad opportunity set for investors in this early stage space. Finally, the pair discuss what the outlook for ESG and impact investing in 2023 looks like.

2:10 - ESG implementation in private markets can in some cases actually be more effective than in Public Markets.

4:15 - Challenges around transparency in private markets when it comes to ESG reporting vs public markets.

8:50 - What other challenges do Stepstone and the wider private markets community face from an ESG perspective?

10:55 - Stepstone's use of TCFD, GRESB specifically in Infra & CRE and SASB framework.

15:30 - What is impact, what does it represent today?

17:40 - How big is the opportunity set in impact investing right now?

18:26 - Specifically on climate, how much capital is needed to transition to a low carbon economy by 2050?

21:45 - What are you expecting to see in terms of the ESG and impact investment landscape for 2023?

In this episode, Escala Partners CIO, Tracey McNaughton, looks back on 2022 at the main events that will have a lasting impact on financial markets. She highlights a number of signposts to watch out for in 2023 and cautions against stepping into Chinese equities even after the latest easing of covid restrictions as return expectations there now come with higher risk.

In this episode, Escala Partners CIO, Tracey McNaughton, shares her views on the latest inflation report out of the US and what it may mean for international equity investors. International equity investors have long benefited by being currency unhedged. Is it time to make a change on the hedging front?

(0:44) - News that a missile has landed in Poland killing two people has broken this morning and quickly affected markets.

(2:10) - You have a dashboard of key economic and financial indicators. What is the dashboard telling you at the moment?

(6:12) - Let's talk about the main event from last week, the US inflation report. It had a big impact on markets.

(8:54) - Does the inflation report change your views?

(11:40) - What about the US dollar. For risk management reasons we tend to be unhedged against foreign currency risk in our international equities portfolio. Has the inflation report changed that view?

(13:57) - The last time we changed our hedging strategy was in March 2020 when it was clear the US Federal Reserve was going to devalue the US dollar through unlimited quantitative easing.

(15:50) - Has your view on China changed with the easing of Covid restrictions and efforts by the authorities to support the property market?

In this episode, Escala Partners CIO, Tracey McNaughton, shares her views on how central banks are thinking about financial stability as an additional factor in their reaction function. Policymakers may be willing to sacrifice the economy to tame inflation, but are likely less willing to sacrifice financial stability. This means uncertainty remains. Investors would do well to observe, rather than predict, where to next.

(0:49) – Monetary policy is centre stage this week. We had the Reserve Bank announcing its 7th rate hike this cycle taking the official rate to 2.85%. The wave of tightening across the world continues.

(3:37) – Despite all of this tightening, a wave of positive sentiment has swept over equity markets in the past few weeks and yet nothing seems to have changed from a fundamental point of view. Several G10 central banks have come across as ready-to-pivot away from super-sized rate hikes. Why the sudden change of heart?

(7:51) – All of this suggests there is still considerable uncertainty for investors which is why Tracey you have been an advocate of not front-running the data.

(13:43) – The good news in all of this is, as you say, the number of attractive buying opportunities right now for investors.

In this episode, Escala Partners CIO, Tracey McNaughton, shares her views on how this has been one of the strangest, most difficult-to-predict economic cycles that we have ever been in. She recommends investors remain cautious for now despite new opportunities already presenting themselves. The rapid retreat of lower for longer interest rates is revealing hidden hazards and creating riptide events that have the potential to catch unsuspecting investors out.

(0:46) - You called it Freaky Friday last week in response to the front page of the AFR.

(3:34) - The era of lower for longer interest rates is now over. What can we expect going forward?

(7:51) - Risk, as you say, is highest during the transition to higher for longer interest rates. What are those risks?

(11:52) - You said that once we get through that transition, volatility in the market will settle. Is that when the opportunities will start to present themselves?

(14:46) - What should we expect when we arrive at the new higher for longer rate environment?

In this episode of The Fund Managers, Escala Investment Analyst David Bruty talks to Patrick Teodorowski, Portfolio Manager of the Pendal Microcap Opportunities Fund. Patrick explains why investors should include an allocation to Australian microcap equities, why Pendal like to invest in founder-led businesses and the outlook for the sector following a period of heightened equity volatility.

In this episode, Escala Partners CIO, Tracey McNaughton, shares her views on the UK fiscal fiasco and how it sent a shockwave through the currency and bond market and nearly brought down the UK pension system. What role did the Bank of England play in setting us up for last weeks' meltdown and could it be repeated elsewhere?

(0:55) - Last week, the UK's new Prime Minister delivered a mini budget that sent shock waves through the UK financial markets.

(4:10) - Beyond the impact on inflation, the moves last week revealed vulnerabilities in some corners of the financial system, such as in the defined benefit pension market.

(7:41) - So, this circular process of forced sales had to be stopped because it would have driven yields even higher. That is when the Bank of England intervened.

(10:23) - We have been living with low interest rates for some time. UK pension plans have been dealing with this problem for some time and the regulators did nothing?

(12:04) - Could the dramatic about face from the Bank of England create a precedent for potentially others to follow?

(14:08) - Risk is clearly very high at the moment, so the focus for investors should be on risk management rather than return management.