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Brief: Private equity real estate investors are raising money faster than they can spend it. U.S. funds have amassed a record $287.8 billion for commercial-property deals, according to Preqin. That’s up 11% from a year earlier and 57% more than at the end of 2019. The pileup of capital affirms the bet that real estate’s rally will continue while inflation rises, stocks wobble and bond returns lag -- and despite new Covid 19 variants that could threaten a comeback for offices, hotels and malls. U.S. property investment volume is expected to rise by 5% to 10% next year as firms try to spend down their dry powder, according to CBRE Group Inc. Private equity giant Blackstone Inc. raised $33.5 billion for real estate deals in the first three quarters of this year while deploying only $25.3 billion. The challenge is that clients -- pensions, endowments, high-net-worth individuals -- are hungry for more. “Investors view real estate as a safe place to be in an inflationary and low-rate environment,” Nadeem Meghji, Blackstone’s head of America’s real estate, said in an interview. The volume of cash chasing deals helped drive up U.S. commercial-property prices an average of 18% in the 12 months through November, led by a 22% jump in warehouses and other industrial real estate, according to Real Capital Analytics Inc. An expected surge of distressed deals hasn’t materialized, freezing deployment of more than $91 billion in dry powder.
Brief: Morgan Stanley told employees who have to be in the office through the first two weeks of January to wear face coverings when not at their desks and limit large in-person meetings. “This guidance applies to all locations (even those where everyone is fully vaccinated),” the New York-based bank said in a memo to staffers this week. “Masking is always encouraged for anyone who is at increased risk or who has a household member who is unvaccinated or at increased risk.” A Morgan Stanley representative declined to comment. A surge in Covid-19 increases worldwide amid the rise of the highly contagious omicron variant has led Wall Street firms and other companies to rethink their return-to-office plans. Citigroup Inc. last week told staffers in the New York metropolitan area they could work from home again through the holidays if they are able. Earlier this month, Jefferies Financial Group Inc. asked its employees to work remotely and get a vaccine booster by the end of January, and Chief Executive Officer Rich Handler self-quarantined after testing positive for Covid-19 himself.
Brief: U.S. consumers took a breather in November a month after an early holiday spending surge, but that pause risks becoming more lasting if Americans pull back when faced with both the fastest inflation in decades and the omicron variant. Purchases of goods and services, after adjusting for higher prices, were little changed following a solid 0.7% gain in October. The government’s figures were the marquee of a pre-holiday burst of economic reports Thursday that showed stronger orders for durable goods, increased new-home sales and firmer consumer sentiment. Underlying the spending figures are a series of crosscurrents. Buffeted by headlines about snarled supply chains, many Americans started their holiday shopping earlier than usual this year, helping to explain the strong advance in the prior month. But consumers are also facing the fastest inflation in decades. With every trip to the grocery store and gas pump eating away a little more of their paychecks, people have less left over for discretionary purchases. And the new omicron variant of Covid-19 threatens to curb the incipient rebound in outlays for services.
Brief: Canada’s economy was humming in the final weeks of 2021 at about pre-pandemic levels, before the country was hit by a wave of Covid-19 cases and fresh lockdowns. Gross domestic product rose by 0.3% last month, extending the streak of monthly gains to six, according to a preliminary estimate from Statistics Canada published Thursday. In October, the economy expanded by 0.8%, the agency said. The gains brought GDP back to about where it was before the crisis hit, amid a strong second-half rebound that came after authorities lifted most Covid restrictions. Some of those restrictions are returning because of the fast-spreading omicron variant. “Overall, these figures are stale in that they speak to conditions before uncertainties related to omicron,” Derek Holt, an economist with Bank of Nova Scotia, said by email. According to Bloomberg calculations, output in November hit levels just shy of where it was in February 2020, before the start of the pandemic. Growth is on track to reach nearly 6% annualized in the fourth quarter, similar to the strong levels recorded in the third quarter.
Brief: Hedge fund manager Bill Ackman exhorted social media users to stop living in “fear of COVID.” Ackman — who leads the firm Pershing Square Capital Management — responded to a tweet from American Enterprise Institute senior fellow Scott Gottlieb, who noted that there is a “striking decoupling” between deaths and cases due to the advent of the Omicron variant of SARS-CoV-2, the virus that causes COVID-19. “We have reached the stage in the Covid crisis where our attention needs to focus on severity and protecting those who are vulnerable rather than case counts,” Ackman said. “While unvaccinated Americans are still at risk, the vax decision is a personal one. We need to give the healthcare system the resources it needs, and we need to start living again.” “It appears that Omicron will ‘vaccinate’ everyone who isn’t already vaccinated. Let’s protect the vulnerable and continue to live our lives. The beginning of the end of living in fear of Covid is near,” Ackman added in a follow-up tweet.
Brief: Private equity real estate investors are raising money faster than they can spend it. U.S. funds have amassed a record $287.8 billion for commercial-property deals, according to Preqin. That’s up 11% from a year earlier and 57% more than at the end of 2019. The pileup of capital affirms the bet that real estate’s rally will continue while inflation rises, stocks wobble and bond returns lag -- and despite new Covid 19 variants that could threaten a comeback for offices, hotels and malls. U.S. property investment volume is expected to rise by 5% to 10% next year as firms try to spend down their dry powder, according to CBRE Group Inc. Private equity giant Blackstone Inc. raised $33.5 billion for real estate deals in the first three quarters of this year while deploying only $25.3 billion. The challenge is that clients -- pensions, endowments, high-net-worth individuals -- are hungry for more. “Investors view real estate as a safe place to be in an inflationary and low-rate environment,” Nadeem Meghji, Blackstone’s head of America’s real estate, said in an interview. The volume of cash chasing deals helped drive up U.S. commercial-property prices an average of 18% in the 12 months through November, led by a 22% jump in warehouses and other industrial real estate, according to Real Capital Analytics Inc. An expected surge of distressed deals hasn’t materialized, freezing deployment of more than $91 billion in dry powder.
Brief: The omicron variant is causing a deluge of covid cases across Wall Street but a top Cantor Fitzgerald LP executive says he expects firms to weather the storm. Pascal Bandelier, global head of equities at the brokerage, said the wave of cases hitting Wall Street workers aren’t proving too severe so far. “I’d say most banks experienced more cases last week than we’ve seen in the last six months combined,” Bandelier said in a phone interview. “The good news is all the employees are exhibiting mild symptoms, which I think is consistent with everything we’re hearing.” The number of people in financial centers has tumbled as omicron takes hold, according to an analysis by Orbital Insight, which monitors activity through satellites and mobile phone data. In the City of London, foot traffic fell on Dec. 15 to 28% of a February 2020 baseline, compared to about 50% at the start of December. Cantor has told staff they can choose to work from home or one of its remote offices until at least early January. Just weeks ago about 60% of employees were back in its New York office, Bandelier said. But he sees reasons for optimism.
Brief: Omicron could double the risk of catching COVID-19 during a flight according to an airline industry medical expert, who warned that the airport carries a higher likelihood that the virus could spread than on the airplane itself. The highly transmissible Omicron variant has been confirmed in more than 100 countries and has quickly become the most common cause of new COVID-19 cases in the US and South Africa."Whatever the risk was with Delta, we would have to assume the risk would be two to three times greater with Omicron, just as we've seen in other environments," Dr. David Powell, medical advisor at the International Air Transport Association, told Bloomberg Tuesday. "The relative risk has probably increased, just as the relative risk of going to the supermarket or catching a bus has increased with Omicron," Powell added. Powell said that the risk of catching COVID-19 caused by the Delta variant on a flight had been "low," though the exact level of that possibility had been unclear. Most of the data about the transmission of the virus on aircrafts was from March 2020 before there was easily available testing, masks, organized boarding procedures, and a high degree of awareness about not flying if you were unwell, he said.
Brief: Beta, delta, omicron. Each emerging variant of the SARS-COVID-2 virus (the virus that causes COVID-19) sparks some market uncertainty as investors brace for the potential impact. It’s important to pay attention to new variants, but I think investors should plan for a longer-term scenario: a prolonged transition from pandemic to endemic conditions. According to the CDC, endemic viruses maintain a constant presence in the absence of intervention. The common cold is one example. COVID-19 is likely to become endemic, but not until public health agencies can safely lift all interventions. Below, I’ll explain why this process could take a long time and share the potential implications for the global economy…
Brief: Wells Fargo & Co said on Tuesday it has delayed its plans for employees to return to the office "given the changing external environment," according to a statement, the latest bank to adjust plans as the Omicron variant spreads. The bank said it will announce new plans for a full return in the new year. Wells Fargo had earlier set Jan. 10 for a mandatory return for many employees, including those who support business lines. About 100,000 employees have been reporting to Wells Fargo locations throughout the pandemic, and offices are open to those who have been vaccinated and chose to use them, the company said. The bank had 254,000 employees at the end of September. Wells Fargo's announcement is one of the latest changes to staffing plans of U.S. financial companies for coming out of the pandemic.
Brief: Just as Americans and Europeans were eagerly awaiting their most normal holiday season in a couple of years, the omicron variant has unleashed a fresh round of fear and uncertainty — for travelers, shoppers, party-goers and their economies as a whole.The Rockettes have canceled their Christmas show in New York. Some London restaurants have emptied out as commuters avoid the downtown. Broadway shows are canceling some performances. The National Hockey League suspended its games until after Christmas. Boston plans to require diners, revelers and shoppers to show proof of vaccination to enter restaurants, bars and stores. A heightened sense of anxiety has begun to erode the willingness of some people and some businesses to carry on as usual in the face of the extraordinarily contagious omicron variant, which has fast become the dominant version of the virus in the United States.
Brief: Former United Airlines CEO Oscar Munoz is sticking with his long-time peers in the airline industry that safety is a top priority during the pandemic, even if that means you have to wear a mask on a plane or employees must be vaccinated. Shared Munoz on Yahoo Finance Live, "This is an industry where no good deed goes unpunished. There are so many viewpoints that it is hard to sort of measure everything. At United — which is all I can speak of with my successor and all those folks — the concept has always been about human safety. When you develop a principle that is paramount, that's what drives the conversations and decisions around that. So everything that we have done at United is about safety." The commentary comes after Munoz's successor as CEO of United Airlines — Scott Kirby — was grilled by Senator Ted Cruz (R, TX) at a hearing of airline industry leaders last week. United Airlines has decided to implement a COVID-19 vaccine mandate for workers, which Cruz insisted is causing job loss for those in his home state of Texas.
Brief: The major averages rebounded sharply on Tuesday following three days of losses amid fears about the fast-spreading Covid omicron variant. The Dow Jones Industrial Average gained about 530 points, helped by gains in Nike and Boeing. The S&P 500 rose about 1.6%. The technology-focused Nasdaq Composite added 2.2%. The small-cap benchmark Russell 2000 was up about 2.7%. Reopening plays, like airlines, cruise lines and entertainment stocks, saw some relief buying on Tuesday. Delta Air Lines rose 6.2%, United Airlines gained 7% and Carnival Corp. added 9%. Las Vegas Sands was up more than 8%. Caesars Entertainment added 8.4%. Boeing rose 5% and Booking Holdings popped 6%... Stocks are coming back from a three-day losing streak spurred by the omicron surge that accounted for 73% of new infections in the U.S. last week, federal health officials said Monday. The S&P 500 notched its worst three-day stretch since September on Monday.
Brief: Britain announced 1 billion pounds ($1.3 billion) in grants and other aid to help the hospitality industry survive the onslaught of the omicron variant of COVID-19, bowing to days of pressure frompubs, restaurants and other businessesthat complain public health warnings have torpedoed the vital Christmas season. Businesses in the hospitality and leisure sectors in England will be eligible for one-time grants of up to 6,000 pounds ($7,954) each. An additional 100 million pounds ($133 million) will be given to local governments to support businesses in their areas hit by the sudden spike in COVID-19 infections driven by thehighly transmissible new variant. While industry groups welcomed the funding, many said it was too narrowly focused and more assistance would be needed if the surge in infections continues or the government imposes more restrictions.
Brief: Europe has moved to implement tougher restrictions in a bid to stop the spread of Omicron, sending equities lower triggered by investors’ “renewed nervousness”. Global equities fell 1.5% last week and are down a further 1-2% today, as Omicron continues to disrupt the economic recovery, according to Rupert Thompson, chief investment officer at UK-based wealth manager Kingswood. He said that, should US markets start to follow suit, "this will leave markets off around 4-5% from their mid-November high”. The latest drop in investor optimism can be attributed to “renewed nervousness” about Omicron, and restrictions being introduced in much of Europe, with the Netherlands now being back in full lockdown, Thompson said. Nevertheless, investment experts believe Omicron presents a temporary disruption to economic recovery, as booster jabs continue to evidence their effectiveness and anti-viral pills start to be rolled out to help reduce hospitalisations, he added.
Brief: A big year in the $7 trillion U.S. ETF industry can be summed up by a single trading day in October. Before the market had even opened, a group of former BlackRock Inc. executives launched a firm looking to shake up the world of credit with seven exchange-traded funds on the way. Then, at the opening bell, the new-product machine cranked into overdrive -- ETFs debuted tracking blockchain, electric vehicles, health care, Chinese innovation, ESG, and more. And by the end of the day, an application for another high-yield credit fund had landed with the U.S. Securities and Exchange Commission. The business has never known times like these. A corner of Wall Street already enjoying a reputation for explosive growth has gone supernova, with a record 445 new products in 2021 so far, according to data compiled by Bloomberg. Behind the rapid expansion is a deluge of new cash as investors chase an economic recovery from the coronavirus, while equity mutual funds fall out of favor.
Brief: The World Economic Forum postponed its annual meeting in Davos next month, thwarted for a second year by the fresh waves of coronavirus across Switzerland and the globe. Having intended to hold the meeting Jan. 17-21, the Forum said in a statement that “continued uncertainty” over the omicron variant had forced a rethink and it now planned to host the meeting in early summer. “Current pandemic conditions make it extremely difficult to deliver a global in-person meeting,” it said. “Despite the meeting’s stringent health protocols, the transmissibility of omicron and its impact on travel and mobility have made deferral necessary.” As recently as last week, WEF officials were expressing confidence that they could host the conference given Switzerland was open to international travel and that regular testing would be provided.
Brief: Risks are said to be on the rise in emerging markets as countries struggle to manage accelerating inflation and a resurgence of Covid-19 cases threatening an already uneven recovery across the globe. Meanwhile, on the geopolitical front, "tectonic" shifts are underway, according to Polina Kurdyavko, head of emerging markets at BlueBay Asset Management. "On China, a new geopolitical landscape is being formed. The withdrawal of troops from Afghanistan and a military alliance between US, Australia and UK are all part of a long term, strategic focus on countering China's regional influence in our view," she said. "Against these top down thematic factors, a number of countries will have significant domestic developments; policy shifts in Argentina and Tunisia come to mind, as well as elections in Colombia and Brazil. "We also would be extremely carefully watching the Ukraine-Russia development. Turkey could have an early election too."Kurdyavko highlighted that 2021 was a "volatile and challenging year", and - in many ways - transitional.
Brief: U.S. Treasury yields were steady on Monday, as investors grew concerned that that omicron Covid variant will derail the recovery. The yield on the benchmark 10-year Treasury note was little changed at 1.4% at around 9:00 a.m. ET. The yield on the 30-year Treasury bond moved 1 basis point higher to 1.829%. Yields move inversely to prices and 1 basis point is equal to 0.01%.Asian equities and oil prices traded lower on Monday following the re-imposition of some Covid-19 restrictions in Europe. It comes as the rapidly-spreading omicron variant threatens to hit the economy over the holiday season and into the new year.The weekend’s news on the variant kept up pressure on investor sentiment, as the World Health Organization said that cases are doubling in 1.5 to 3 days in areas with local spread, and U.K. officials said more Covid-19 restrictions were possible.
Brief: Jefferies Financial Group Inc. Chief Executive Officer Rich Handler said he tested positive for Covid-19 earlier this month and is approaching his 10th day of isolation. “Three days after we decided at Jefferies to have our people once again work from home for safety, I tested positive and have been self-quarantining,” Handler said Sunday in a post on Instagram. “We all have much to be grateful for and every day we get closer to the sun shining brightly, so stay optimistic.” Jefferies asked staffers on Dec. 8 to start working from home amid a rise in Covid cases among its workforce. The New York-based firm is aiming to have its staff back at the office by Jan. 17, Handler and President Brian Friedman said in an Instagram post on Saturday.
Brief: World shares fell on Friday after technology companies led Wall Street benchmarks lower as investors weighed the implications of higher interest rates, surging coronavirus cases and tensions between Beijing and Washington. Benchmarks declined in Paris, London, Frankfurt and Tokyo but rose in Shanghai. U.S. shares dropped a day after the Federal Reserve said it’s preparing to begin raising rates next year to fight inflation, and traders were also considering moves by other central banks. The Bank of Japan said Friday it would reduce some of its pandemic support measures, reducing purchases of corporate bonds to pre-crisis levels after March. It also extended by six months extra support for lending to small companies. But its board meeting otherwise kept ultra-loose monetary policy mostly unchanged.
Brief: Inflation in the UK hit 5.1% in November as the country continues to battle the latest variant of Covid-19.The 10-year high has reignited the debate among professionals as to whether rising inflation is embedded or transitory.Investors have not yet felt the full impact of the Omicron variant or the wider impact of higher energy and consumer prices, according to Nigel Sillis, client portfolio manager at Cardano. It remains to be seen how ‘temporary’ the present raft of inflation-stoking supply disruptions are,” he said, “how current trends may be aggravated by Omicron and, beyond that, we have not yet seen the full effects of higher energy prices upon consumer prices more generally.“There are still upside risks. Amidst uncertainty, pension funds should aim to fully hedge.
Brief: Wall Street banks and investment firms are retrenching from their push to get staff back to the office, with Citigroup Inc (C.N), Goldman Sachs Group Inc (GS.N), Carlyle Group Inc (CG.O), Blackstone (BX.N) and MetLife (MET.N) among the latest to adjust plans as the Omicron variant of the coronavirus spreads. The institutions are rethinking their plans to return to business-as-usual amid a spike in COVID-19 cases in New York and other financial hubs and growing concerns over the fast-spreading Omicron. "Even before Omicron, it was clear that there was not going to be a full ‘back to normal’ in most office-based jobs – some form of work from home is likely to endure into the future," Rachel Lipson, Project on Workforce at Harvard University’s Malcolm Wiener Center for Social Policy, said in a recent interview.
Brief: Citadel, Blackstone Inc. and Millennium Management are among asset managers telling staff this week that they may once again work remotely, at least for the next several weeks, in response to the latest spike of Covid cases.Ken Griffin’s Citadel, among the earliest hedge funds to require staff to return to the office during the pandemic, isn’t mandating that they stay away, a spokesman for the Chicago-based firm said Thursday in an email. The guidance also applies to Griffin’s market-making operation, Citadel Securities. Blackstone, the world’s biggest alternative asset manager, told its U.S. employees they can work from home for the rest of the year, as did rival Carlyle Group Inc., according to spokespeople for both private equity firms.
Brief: Apple told corporate staff this week that it is delaying a planned return to U.S. offices until an undetermined date, according to reports from Bloomberg News and NBC News reporter Zoe Schiffer. A memo from Apple CEO Tim Cook said workers would get advance notes a month before a new return date is set, and that each employee would receive $1,000 in order to outfit their home for remote work. Apple previously planned for most employees to return to offices on Feb. 1. An Apple spokesman confirmed that a new return-to-office date hasn’t been set. Silicon Valley neighbor Google told its employees earlier this month that they would not be required to come back into the office on Jan. 10, as planned. Other tech companies including Lyft, Uber, and Amazon have also pushed back their dates.
Brief: The economic shock of Covid-19 has left the world's largest economies grappling with rising inflation on the one hand and lower-for-longer interest rates on the other, as governments strive to control high levels of debt. At the same time, monetary and fiscal support during the pandemic has left many traditional income-generating assets with high valuations, making it harder for investors to find reliable income sources at a reasonable price. According to Alfred Murata, managing director and portfolio manager at PIMCO, fixed income investors today find themselves in a more difficult position than during the spring of 2020, when credit valuations were at attractive levels. In contrast, the current environment requires a delicate balancing act between achieving an attractive level of yield and going too far up the risk spectrum. "The more generic, plain vanilla assets have seen a lot of support from central banks over the past year, so the valuations of these assets are not as compelling today," explains Murata. "You have to work harder to generate attractive returns in this environment."
Brief: Australia's unemployment rate has dropped sharply after lockdowns, with employers scrambling to hire staff. Official ABS data shows the unemployment rate dived from 5.2 in October to 4.6 per cent in November, after lockdowns had ended in New South Wales, Victoria and the ACT. The drop came despite a massive increase in the percentage of people in work or looking for it, with a whopping 366,100 extra people estimated to have been in work last month. AMP Capital chief economist Shane Oliver said the participation rate of 66.1 per cent marked a big difference between the post-COVID recovery in Australia and the US. "The near-record participation rate contrasts with that in the US where it is running well below pre-COVID levels," he noted. Other labour market indicators were also positive, with underemployment dropping from 9.5 to 7.5 per cent and hours worked up 4.5 per cent. Dr Oliver said all the indications were that the current jobs recovery would continue, with "businesses having to scramble for workers in some industries and not wanting to let them go". "Strong levels for job postings and hiring intentions point to a continuing tightening in the labour market," he added.
Brief: As the COVID-19 pandemic continued to sow uncertainty and volatility in the financial markets over the last year, participants in the hedge fund industry took refuge in familiar deal terms and experienced managers, but also hedged their bets and allocated to newer managers, according to a study by the law firm Seward & Kissel LLP that examines the industry’s use of side letters. The Seward & Kissel 2020/2021 Hedge Fund Side Letter Study, released today, revealed strong side letter activity in the midst of the pandemic, with investors continuing to allocate funds to mature managers, whose average regulatory assets under management in the study increased from $5.1 billion last year to $6.3 billion this year—while still engaging with newer managers (those with less than two years of experience), as it appears investors have become comfortable with the "new" fundraising environment and leveraged virtual manager and diligence meetings. The study also indicates that in a return to past form, funds of funds once again became the most common type of side letter investor, reversing a downward trend of recent years. Additionally, the consistently popular fee discount clauses continued to be a common term used in side letters, tied this year with most-favored-nation clauses.
Brief: Most hedge funds are now moving to a permanent hybrid working environment as a result of the Covid-19 pandemic, but concerns over team-building, collaboration and decision-making remain, as more managers look to expand their product offering into new areas and strategies, a wide-ranging new study published by the Alternative Investment Management Association and KPMG has found. AIMA, the global industry trade association for hedge funds, and KPMG quizzed 162 hedge fund managers collectively representing USD1 trillion in assets under management – roughly quarter of the total global industry assets – on how their businesses are pivoting to the new working environment that has resulted from the coronavirus pandemic. The report, titled ‘Accelerating out of the Pandemic’, follows last year’s survey, ‘Agile and Resilient’, which gauged how managers of all sizes were grappling with the range of challenges thrown up by the crisis. For this year’s report, respondents were questioned on how they are now optimising collaboration within the challenging hybrid work environment, the ways in which they are navigating the virtual capital raising process, and what new investment opportunities are emerging from the events of the past two years, among other things.
Brief: The Securities and Exchange Commission today voted to propose amendments to certain rules that govern money market funds under the Investment Company Act of 1940. In March 2020, growing economic concerns about the impact of the COVID-19 pandemic led investors to reallocate their assets into cash and short-term government securities. Prime and tax-exempt money market funds, particularly institutional funds, experienced large outflows, which contributed to stress on short-term funding markets. The Commission’s proposed amendments are designed, in part, to address concerns about prime and tax-exempt money market funds highlighted by these events. “Together, these amendments are designed to reduce the likelihood of runs on money market funds during periods of stress,” said SEC Chair Gary Gensler. “They also would equip funds to better meet large redemptions, addressing concerns about redemption costs and liquidity. Given the broad reach of short-term funding markets, these proposals speak to our remit to maintain fair, orderly, and efficient markets.”
Brief: National Bank of Canada (NA.TO) said Wednesday it had asked staff to work remotely, if possible, making it the second large Canadian lender to return to work from home amid growing concerns over the Omicron coronavirus variant. Canada's top health official Theresa Tam warned on Monday that COVID-19 cases in the country could rise rapidly in the coming days. That has led Canadian banks and financial firms to rethink return-to-office plans. The decision impacts the bank's nearly 20,000 staff in Canada.The rapid spread of the Omicron strain has wreaked havoc with companies plans to return to normalcy. Bank of Nova Scotia (BNS.TO), Canada's third largest lender, said Monday it would pause its plan for employees working remotely to return to its Toronto head office starting on Jan. 17.
Brief: Like most firms, hedge funds have made a generally smooth transition to both the digital environment and the hybrid office/home work model since the first wave of the pandemic hit in March 2020. As the hybrid model becomes the “new normal,” however, some of these companies have begun to take a harder look at some of the challenges they now face in a highly decentralized environment. To get a sense of where firms actually stand when it comes to preferred work location, KPMG and the Alternative Investment Management Association surveyed 162 hedge fund managers representing approximately $1 trillion in assets under management. The results, published in a report entitled, “Global Hedge Fund Industry: Accelerating Out of the Pandemic,” show that 46 percent of hedge fund managers expect to spend two to four days a week in the office.
Brief: Biotech giants Moderna Inc. and Amgen Inc. said they won’t attend JPMorgan Chase & Co.’s annual health-care conference in San Francisco in January, decisions that come as Covid-19 cases surge in the U.S. and the omicron variant poses a threat of increased transmission. The event, known for its overcrowded panels and late-night parties, usually draws thousands to San Francisco’s Westin St. Francis hotel every winter. This year marks its 40th anniversary, and many industry players have been eager to return after last year’s event was forced online amid a winter surge in virus infections. However, the recent climb in new Covid cases across the country, coupled with concern that omicron could add to those totals, has caused some industry leaders to call for holding the conference online again. The J.P. Morgan Healthcare Conference “should go virtual and avoid a super-spreader event and a PR disaster for our industry!” said John Maraganore, chief executive officer of Alnylam Pharmaceuticals Inc., in a tweet.
Brief: Fund managers are increasingly bullish about the outlook for both Europe’s economy and its stock markets, according to the latest Bank of America European fund manager survey. It reveals 37% of respondents expect a stronger European economy over the next year, while 28% believe the current equity rally will last until at least the fourth quarter of 2022. The study also showed inflation concerns were fading and an increasing number of investors see Covid as the biggest tail-risk since the emergence of the Omicron variant. According to the survey, a net 30% of respondents expect lower inflation over the coming year, while there’s been a fall in the proportion of investors seeing it as the key downside risk.“Despite the more sanguine inflation outlook, investors expect central banks to start tightening policy, with a net 59% of respondents regarding global monetary policy as too stimulative,” it stated.
Brief: Google has told its employees they will lose pay — and will eventually be fired — if they don’t comply with the company’s Covid-19 vaccination policy, according to internal documents viewed by CNBC.A memo circulated by leadership said employees had until Dec. 3 to declare their vaccination status and upload documentation showing proof, or to apply for a medical or religious exemption. The company said after that date it would start contacting employees who hadn’t uploaded their status or were unvaccinated, as well as those whose exemption requests weren’t approved. The document said employees who haven’t complied with the vaccination rules by the Jan. 18 deadline will be placed on “paid administrative leave” for 30 days. After that, the company will put them on “unpaid personal leave” for up to six months, followed by termination.
Brief: Increasingly frequent spikes in the VIX volatility index could offer hedge funds and other investment managers strong return opportunities amid the resulting equity market gyrations, new analysis published by Man Group suggests. Probing various trends emerging from the biggest VIX surges over the past 30 years, Man’s ‘Views From The Floor’ commentary noted that four of the top 10 spikes have occurred since the Covid-19 pandemic. At the end of last month, the volatility index soared by some 11 points – a 10-month high – as a result of growing fears over the emerging Omicron Covid-19 variant. The note, which explored the merits of investors buying into a VIX spike, observed that if the S&P 500 is up in the week after the VIX spike, history shows most forward returns come during that first week – generating a median return of 1.4 per cent. “As time goes on, returns drop, persisting into the second week less than half of the time,” noted Ed Cole, managing director, discretionary investments at Man GLG, adding that while the average return in the second week is negative, although this improves over a 3-month basis.
Brief: Asset management firm Fidelity Investments on Monday said it had paused some voluntary return-to-office plans while Morgan Stanley (NYSE:MS)'s CEO said he expects COVID-19 to be an issue through the next year, in a further sign that America's financial industry is rethinking its return to "business as usual." U.S. financial firms have been more proactive than other industries in encouraging employees to return to offices. Those plans have come under renewed scrutiny with COVID-19 cases again on the rise and as the Omicron variant of the coronavirus spreads swiftly. Some financial firms are now choosing to pull back on holiday parties, recommend booster shots, or even advise returning to work from home. "The private acknowledgement is that return to work plans set for January need another look," said Neal Mills, chief medical officer for professional services firm Aon (NYSE:AON), who advises corporations on their return-to-work plans. Mills said he received calls every day last week from companies experiencing COVID-19 outbreaks seeking advice on whether to delay bringing employees back or reinstate mitigation measures, like social distancing. Cases surged after Thanksgiving and are expected to continue rising and peak in January, he said. Family-controlled Fidelity, headquartered in Boston, paused pilot return-to-office programs at its offices in Boston, Smithfield, Rhode Island, and Merrimack, New Hampshire "due to rising COVID risk scores," spokesman Michael Aalto said.
Brief: The Asian Development Bank (ABD) has cut its economic growth forecast for developing Asia for this year and next due to the emergence of the Omicron coronavirus variant. In its latest outlook published on Tuesday, the Manila-based development bank forecast the region’s emerging economies would grow 7 percent in 2021 and 5.3 percent in 2022, down 0.1 percent from its previous estimate. The bank cited a resurgence of COVID-19 cases due to the Omicron variant as the biggest risk to the region’s recovery, with other dangers including a prolonged slowdown in China’s housing market, rising inflation and global supply chain disruptions. Among the major economies looked at, the ABD trimmed China’s growth forecast to 8 percent in 2021 and 5.3 percent next year, down 0.1 percent and 0.2, respectively, from its September estimate. The bank cut India’s growth estimate to 9.7 percent for 2021, compared with 10 percent in September, with its 2022 estimate of 7.5 percent growth remaining unchanged. Growth for Southeast Asia was cut to 3.1 percent for 2021, down 0.1 percent, but raised 0.1 percent to 5.1 percent for next year.
Brief: Despite facing an array of both economic and competitive challenges, the outlook for the global investment management business in 2022 is neutral, says Fitch Ratings. In a new report, the rating agency said global investment managers are facing competitive pressures and obstacles such as high inflation and elevated valuations. But firms in the sector are prepared to face down these threats through a combination of scale, strategic diversification and robust finances. “Fitch expects rated global investment managers to be more resilient to continuing competition and potential market volatility given enhanced scale and strong franchises,” said Nalini Kaladeen, director with Fitch, in the report. “Overall, we believe alternative [managers] are better placed to withstand challenges than traditional [managers], given stronger active flow dynamics and locked-in fee streams that are largely insulated from fair value changes on investments,” she added. Fitch predicted traditional investment managers would likely use mergers and acquisitions to help fend off competitive threats.
Brief: JPMorgan Chase & Co on Tuesday instructed unvaccinated staff in Manhattan to work from home, a further sign that banks and other financial firms are tightening protocols as COVID-19 infections rise and the Omicron coronavirus variant spreads. The U.S. bank, one of the most aggressive in bringing employees back to the office, had previously allowed unvaccinated staff to work in its Manhattan offices provided they were tested twice a week. In a memo to staff seen by Reuters, the bank urged unvaccinated staff to get vaccinated and for those who are eligible to get booster shots. It also relaxed mask requirements for vaccinated staff working in its Manhattan offices. "We continue to agree with health authorities that being vaccinated against COVID-19 is the best way to keep ourselves and our loved ones safe - especially as we face the winter months and a new variant - so please consider getting vaccinated if you aren't already, and getting your booster if you are," the memo said. More than 90% of JPMorgan staff based in Manhattan are vaccinated, according to the memo.
Brief: Goldman Sachs Group Inc. has told its London staff to work from home if they can, as the City of London’s biggest firms adjust to the latest government guidance. “Those of you who are able to work from home effectively should do so from Monday,” the lender said last week in an internal memo. The bank’s offices will remain open for those who still need to come in. Safety protocols including an on-site testing program and the wearing of masks away from desks remain in place. The guidance mirrors moves from firms across the City of London after U.K. Prime Minister Boris Johnson tightened pandemic rules to curb the spread of the omicron variant.HSBC Holdings Plc, Deutsche Bank AG and Citigroup Inc. have all told staff to return to home working if they could.
Brief: New research from the charity investment arm of independent investment manager James Hambro & Partners reveals 64 per cent of charities with at least GBP1 million of investable assets have had to sell or cash in some of their investments during the Coronavirus crisis because they have suffered from a fall in income from for example, fewer fund-raising events. Also, four out of ten (42 per cent) say they have been forced to do this to meet growing demand for their services during the pandemic. Charities with investible assets rely heavily on them to generate an income, but 18 per cent said the income they generate has fallen dramatically since the Coronavirus crisis started, and a further 52 per cent said they have fallen slightly.
Brief: Bonds get battered in run-it-hot economies. Stocks march higher. And it’s a good idea to hedge inflation, according to BlackRock Inc. If those forecasts for 2022 sound like a replay of 2021 it’s no coincidence. The world’s biggest asset manager says markets are in a “new nominal” where equity is favored over fixed-income. Two consecutive annual losses for bonds and gains for stocks is an occurrence so rare it last happened almost 50 years ago.“This was the new nominal in action and marked the start of a regime shift,” BlackRock strategists including Wei Li and Scott Thiel wrote in a report published Monday. “We see the forces that drove stocks up and bonds down in 2021 to still be at play in 2022 as inflation settles at higher levels than pre-Covid.”
Brief: The end of November saw the largest one-day fall in stock prices globally since June 2020, as investors reacted to the potential economic impact of a possible fourth wave of Covid-19, manifest in the new and ominously named Omicron variant of the Sars-Cov-2 virus. But the panic selling was not entirely across the board: on the same day, the US biotech firm Moderna, one of three main suppliers of a Covid vaccine, saw its share price jump by 25%, adding a tidy $35bn to its market capitalisation. Moderna is an obvious beneficiary of any new round of pandemic panic, but the extent of the share price reaction was helped by news that it expects to have a new version of its Spikevax product out soon specifically addressing Omicron.
Brief: The tepid trade for U.S. tech behemoths in the last couple of months is a “sign of things to come” in 2022, according to David Neuhauser, chief investment officer at U.S. hedge fund Livermore Partners. With inflation running extremely hot and central banks under pressure to tighten monetary policy, along with the emergence of the omicron Covid-19 variant in recent weeks, global stock markets face a unique confluence of uncertainties. The U.S. Labor Department will release November’s consumer price index reading on Friday, which is expected to show annual inflation notching an almost 40-year high. Neuhauser believes this upward trend in prices is going to continue as new Covid variants emerge and supply chain bottlenecks persist.
Brief: European markets lacked direction on Friday as renewed concerns about the omicron Covid-19 variant continue to weigh, while investors reacted to key U.S. inflation data.The pan-European Stoxx 600 hovered around the flatline by mid-afternoon, having recouped opening losses of around 0.4%. Autos jumped 1.3% while retails stocks slipped 0.3%. The U.S. Labor Department revealed on Friday that consumer price index (CPI) inflation stateside soared 6.8% annually in November, its steepest yearly climb since 1982 and slightly ahead of economist expectations. Data on Thursday showed U.S. jobless claims hitting their lowest rate since 1969 last week, as 184,000 people filed new unemployment insurance claims, with the labor market continuing to tighten.
Brief: The City of London could be about to become a ghost town again after firms started telling thousands of staff to work from home in response to the latest UK government guidance. HSBC Holdings told UK employees on Thursday afternoon they should return to home-working where possible, according to a spokesperson. Those who still need to work in branches or offices have been asked to take daily Covid-19 tests. Deutsche Bank is significantly reducing the number of staff working in the office from Monday, according to a person familiar with the matter. The arrangements will be similar to earlier in the pandemic when most staff worked from home, with exceptions for trading teams or those with personal circumstances that require attendance in the office. The City of London could be about to become a ghost town again after firms started telling thousands of staff to work from home in response to the latest UK government guidance.
Brief: A sharper than expected slowdown to UK growth in October has shown how the economy is “vulnerable” to Covid shocks, while intensifying the Bank of England’s interest rate “dilemma”, it has been warned. The economy grew by just 0.1% in October, according to figures published on Friday (10 December) by the Office for National Statistics, which highlighted a fall in construction and supply chain issues. Maike Currie, investment director at Fidelity International, said: "The steam has well and truly been taken out of the UK economic recovery." "With the government moving to implement its ‘Plan B' over concerns on the Omicron variant, there is a creeping sense of déjà vu. "Workers are heading back to their kitchen tables and the big festive season that retailers and the hospitality sector had their hopes pinned on - while starting on a high during Black Friday - might not have as much sparkle as hoped."
Brief: People are increasingly turning to riskier investments as pandemic uncertainty continues, with current global economic conditions playing a key role, according to Schroders' latest Global Investor Study. Out of 23,000 people surveyed in 33 locations worldwide, over a third said they will allocate more towards high-risk investments. This increased to 44% for people aged between 18 and 37, the study found.Many people are investing in new, high-risk asset classes for the first time, Schroders highlighted. "The results indicate that, while many people feel compelled to take on greater risks to compensate for Covid uncertainty and concerns caused by rising inflation, this is even more so the case for younger investors," the firm said. Nearly 60% of investors in the 18-37 age group said they would make higher-risk investments in pursuit of returns when presented with the scenario where interest rates are at zero or negative.
Brief: The rate of offices standing empty in central Tokyo in November dropped for the first time since the pandemic began, an early signal that the worst could be over for the capital’s property market. Vacancies fell by 0.12 percentage points to 6.35% in Tokyo’s five main business districts, real estate brokerage Miki Shoji Co. said on Thursday. Since hitting 1.49% in February 2020, the lowest since the country’s economic bubble burst in the early 1990s, vacancies have surged. The pandemic and an uncertainty over the future of the conventional work environment led tenants to cancel existing leases or postpone signing new ones. After the most recent virus state of emergency was lifted at the end of September, Japan has seen a recovery in activity, with Covid cases and deaths among the lowest in the world.
Brief: Florida has the chance to reinvent itself as a destination for talented workers after a portion of the finance industry relocated to the state during the pandemic, Citadel founder Ken Griffin said. “Right now Florida has an opportunity to capture a new moment in America,” the 53-year-old hedge fund billionaire said Thursday at a luncheon hosted by the Palm Beach Civic Association at the Florida city’s Four Seasons hotel. “There is a chance for Florida to reposition itself as a destination for talent in a way that forever changes the state.” During the Covid-19 pandemic last year, Citadel Securities -- the trading portion of Griffin’s empire -- largely left its Chicago and New York offices and took over the Four Seasons Palm Beach, moving dozens of employees and their families, and building a temporary trading floor complete with rows of monitors supporting staff and interns.
Brief: The World Economic Forum scheduled for next month in Davos is set to go ahead even as Europe and Switzerland grapple with a fresh wave of coronavirus infections. Multiple countries have implemented new restrictions, including Switzerland, which this week said anyone entering the country must present a negative PCR test and do a second test four to seven days after arrival. The government also expanded the use of masks and covid certificates and urged people to work from home. The event “will provide a key platform for global health leaders to meet with government and business at the highest level to move forward,” a WEF spokesman said in an emailed statement. “Switzerland is open to international travel and events, conducted under sensible and strict public health measures.” Switzerland on Wednesday recorded more then 12,000 new infections within 24 hours. The government on Tuesday decided to call in the armed forces to assist hospitals with patient care, transport and vaccinations.
Brief: More money has flowed into the private equity industry amid the Covid-19 pandemic and Federal Reserve stimulus efforts, Blackstone Inc. co-founder Steve Schwarzman said. “When the government prints enormous amounts of money, it has to go someplace,” Schwarzman said at the Goldman Sachs U.S. Financial Services Conference on Wednesday. “It’s coming to our alternative assets area generally, and, for our firm, we’re increasing share everywhere.” Private markets investing has gotten “much more popular” recently, he added. Blackstone has $731 billion in assets and is the world’s largest alternative asset manager.
Brief: After nearly two full years of Covid-driven chaos, JPMorgan Chase is predicting 2022 will usher in a return to normalcy and a full healing of the economic wounds caused by the health crisis. "Our view is that 2022 will be the year of a full global recovery, an end of the global pandemic and a return to normal conditions we had prior to the Covid-19 outbreak," Marko Kolanovic, JPMorgan's (JPM)chief global markets strategist, wrote in a note to clients on Wednesday. "This is warranted by achieving broad population immunity and with the help of human ingenuity, such as new therapeutics expected to be broadly available in 2022." America's biggest bank expects progress on the health front will spark a "strong" recovery in the economy, marked by a return of global mobility and robust spending by consumers and businesses. JPMorgan is forecasting continued growth for the stock market, albeit at a slower pace. The bank set a year-end target of 5,050 for the S&P 500, up by 8% from current levels.
Brief: In November, hedge funds saw the largest single-month decline since the beginning of the pandemic, according to data from Hedge Fund Research, a hedge fund data provider. The HFRI Fund Weighted Composite Index, which aggregates the performance of funds of all sizes, fell 2.2 percent. The index hasn’t seen a decline of that magnitude since a 9.1 percent drop in March 2020. “November was an interesting month. It marked a reversal of October trends,” said Kenneth Heinz, HFR president, in a virtual press conference on Wednesday. “In the final days of the month, you saw a reversal of the post-quarantine, post-pandemic, and inflation-positive trades that have [defined] the last few months.” The index increased a modest 1.3 percent in October before slowly rolling over in November. Heinz said the bulk of the decline occurred in the last three trading days of the month, during which concerns over the spread of the Omicron coronavirus variant induced panic and sharp declines in the financial markets.
Brief: Less than two weeks after the spread of a new coronavirus variant sent ripples through global stock markets, it’s almost as if omicron never happened. Equities have quickly bounced back from their recent slump, with the S&P 500 index closing on Tuesday at its highest level since Nov. 24, the last trading day before scientists warned about a potentially more transmissible strain of the virus. In Europe, the benchmark Stoxx 600 has also nearly recovered losses triggered by the omicron variant. More data from South Africa on Tuesday suggesting symptoms are mild gave a green light for fast-money “to pile back into the buy everything global recovery trade,” Jeffrey Halley, a senior market analyst at Oanda, wrote in a note on Wednesday with the title “Omi-whatever.”
Brief: The emergence of the Omicron Covid-19 variant prompted abrupt sales of equity funds on one hand, with record inflows to ESG funds on the other – due in part to COP26 – according to the latest fund flows figures from Calastone. Omicronsaw sales of equity funds at the end of November hit GBP83 million over a two-day period, with the sharp increase in trading volumes indicatinf significant investor uncertainty. It’s too soon though, to judge the impact of the new variant, with Calastone expecting more volatility in the coming weeks. For the whole month of November, equity funds saw inflows thanks to record buying of ESG funds.
Brief: CAMRADATA has published a new whitepaper, Absolute Return Investing which considers if the strategy can still generate positive returns for investors as the world moves through the pandemic. The white paper includes insight from firms including Amundi Asset Management, Artemis, Unigestion, bfinance, Capita, Law Debenture and Local Pensions Partnership who attended a virtual roundtable hosted by CAMRADATA in October. The report highlights that absolute return investing strategies – which seek to generate positive returns over time regardless of market conditions – should be able to thrive in the current market uncertainty.
Brief: “First, Ray Dalio foresaw the 2008 financial crisis. Then, he predicted years of long-term financial strain on the U.S. economy from the Covid pandemic. Now, the 72-year-old billionaire investor who built Bridgewater Associates into the world’s largest hedge fund is warning of a new economic catastrophe on the horizon — and he wants you to be prepared. “I think we’re at risk of a war with China,” Dalio told CNBC Make It during a live-streamed Q&A on Friday. “Largely due to misunderstandings.”Dalio noted that his predictions aren’t facts: He’s been wrong before, too. But, he said, future catastrophes are inevitable, according to historical patterns over the last 500 years. In other words, if an upcoming U.S.-China conflict doesn’t tank the economy, something else will. Here’s why he thinks disaster is on the horizon, and his top two tips on financially preparing for it.
Brief: As ESG investing has become “truly mainstream”, new risks are emerging for companies and investors that will test how well “we have learned the lessons of the past”, according to data and index provider MSCI. Speaking in a webinar on 7 December, MSCI's head of ESG research Linda-Eling Lee said: "We are very far from net zero." A recent study by the New York-headquartered firm shows that around only 10% of the world's companies are on track to achieving net zero by 2050. For this reason, climate commitments laid down during COP26 from private capital are "very ambitious", said Lee. In the short-term, fund managers might be tempted to make portfolios look more aligned to net zero goals than they actually are, she argued.
Brief: The biggest take-private buyout of the year has been blocked AstraZeneca (AZ) over concerns that it would lose out to a rival if the company was then sold. One of the world’s biggest private equity firms, Advent International and GIC, one of the three investment entities that manage Singapore government reserves, offered a 34% premium on the share price for the rare disease company in September 2021 as part of a $7.6bn offer. While the deal was approved by the Sobi board, it was conditional on 90% of shareholders agreeing. AstraZeneca, which owns 8% of Sobi from an earlier rights deal, reportedly collapsed the deal, which then failed to meet its threshold. Sobi lost a quarter of its value after news of the failed deal reached the markets, leading Sobi chairman Håkan Björklund to express disappointment. “The Board supported the public offer by Advent and GIC as we believed in the strategic merit of the transaction,” but added that “it is the shareholders who decide this”.
Brief: Stock investors probably have more important things to worry about than the emergence of the new coronavirus strain, according to Morgan Stanley’s strategists. While “not that concerned about omicron as a major risk factor for equities,” the strategists led by Michael Wilson see headwinds building elsewhere, after Federal Reserve Chairman Jerome Powell signaled the possible accelerated tapering of asset purchases. “Tapering is tightening for the markets, and it will lead to lower valuations like it always does at this stage of any recovery,” the strategists wrote in a note to clients. Brian Nick of Nuveen, the investment arm of TIAA, with $1.3 trillion in assets under management, also said Monday that “the major risk to our outlook remains a sudden tightening of financial conditions if central banks are forced to respond to inflation driven by an overly tight labor market.” In contrast, most of the economic and market risks associated with the virus “are behind,” according to Nuveen’s outlook for 2022. Other strategists, including those at JPMorgan Chase & Co., have also singled out a hawkish turn by central banks, and not Covid-19, as the main risk to their outlook for stocks. But while JPMorgan reiterated on Monday that its base-case scenario is for the equities rally to continue into next year, Morgan Stanley sees the S&P 500 trending lower, and valuations declining.
Brief: The economic fallout from the pandemic has been a harsh reminder of how fleeting financial security can be. Many millennials have taken that lesson to heart and not only want to save more but also learn more about the investment companies behind their funds. Four in 10 millennials changed their savings and investment attitudes during the pandemic, according to the latest survey from Hearts & Wallets, a market research and benchmarking firm. Three key metrics are at the highest level of the past decade, reflecting an overall positive mood about finances and investing: More than half of U.S. households feel no or little “anxiety about their financial situation as they look to their future.” Nationally, nearly 30 percent of households feel “very” or “somewhat” experienced with investing. More than a third of households feel “very” or “somewhat” comfortable in “accepting volatility in the hope of getting a higher return.” Millennials showed an 11 percent increase in one year of feeling experienced as investors. They also were the generation most comfortable with investing risk this year where previously this generation had been the most skittish.
Brief: CTAs' run of positive performance over the last 12 months came to an abrupt end in November, as news of the Omicron Covid-19 variant hit markets at the end of the month, according to the latest figures from Society Generale. The flagship SG CTA Index was down -3.79 per cent in November but is still strongly positive so far this year at 5.71 per cent. Likewise, the SG Trend Index lost -4.71 per cent for the month, but still stands up 8.59 per cent year-to-date, with one month still to go. All of the individual CTA constituents of both indices experienced losses in November, driven by a fall at the end of the month in particular on Friday, 26 November: the CTA Index lost -3.52 per cent in one day, the worst single day since the index started in 2000; and the Trend Index lost -4.43 per cent, the fourth biggest single day loss ever and worst since 2007.
Brief: Wealth gaps are reflected in bigger carbon footprints, too. In North America, for example, the top 10% emits an average 73 metric tons per capita each year, compared with less than 10 tons for the poorest half. Measured by both income and wealth, Europe is the most equitable region, according to the report. The 19% of total income earned by the poorest half of Europeans is higher than the equivalent share for that group anywhere else. Pandemic policies like income support for workers thrown out of their jobs likely helped prevent that gap from widening further. “The Covid crisis has exacerbated inequalities between the very wealthy and the rest of the population,” said Chancel. “Yet in rich countries, government intervention prevented a massive rise in poverty.”
Brief: Some of New York City’s biggest banks and other companies were “blindsided” by Mayor Bill de Blasio’s decision to impose a vaccine mandate on private sector employees, according to Kathryn Wylde, who runs the Partnership for New York City, an influential business group that counts JPMorgan Chase & Co. and Goldman Sachs Group Inc. as members. De Blasio on Monday said all private-sector employers must require their workers to be vaccinated by Dec. 27, with no test-out option. The mandate will cover roughly 184,000 businesses. Although many large companies like Goldman Sachs and Morgan Stanley already require vaccination to work from their buildings, Wylde said the city’s decision to impose a mandate wasn’t made in coordination with companies and executives and that it will sow uncertainty among the business community.
Brief: Stock investors probably have more important things to worry about than the emergence of the new coronavirus strain, according to Morgan Stanley strategists. While they are “not that concerned about omicron as a major risk factor for equities,” the strategists see headwinds building elsewhere, after Federal Reserve Chairman Jerome Powell signaled the possible accelerated tapering of asset purchases. “Tapering is tightening for the markets and it will lead to lower valuations like it always does at this stage of any recovery,” the strategists led by Michael Wilson wrote in a note to clients. The comments echo the views of other strategists, including those at JPMorgan Chase & Co., who singled out a hawkish turn by central banks as the main risk to their outlook for stocks. But while JPMorgan reiterated on Monday that its base-case scenario is for the equities rally to continue into next year, Morgan Stanley sees the S&P 500 trending lower, and valuations declining.
Brief: Financial advisers have named Covid variants as the biggest threat to market stability in 2022, as the Omicron strain of the virus starts to spread across the UK and other parts of the world. Quilter Investors surveyed 300 financial advisers as part of its 2022 Global Outlook report, with 66% saying new variants and the speed of global vaccination campaigns is the biggest concern as this year comes to an end. An additional 19% cited higher inflation as the biggest risk, while 12% were most concerned about the potential failing of, or short lived, strong economic growth. The end of November saw the FTSE 100 suffer its worst session in more than a year on the back of news that the Omicron variant had reached the UK.
Brief: European stocks closed higher on Monday as investors closely monitored developments around the omicron Covid variant and bitcoin volatility.The pan-European Stoxx 600 provisionally ended up around 1.4%, with travel and leisure stocks jumping over 4.1% to lead gains. Almost all sectors and major bourses closed the session in positive territory. While European markets made a positive start to the trading week on Monday, the picture is more mixed at a global level.Stocks in Asia-Pacific dropped on Monday as investors monitored bitcoin prices after they fell sharply over the weekend. Meanwhile, oil prices jumped more than 2.8% in European afternoon trading hours after mostly falling last week on Covid uncertainty and the OPEC+ plan to increase output in January.
Brief: Investors’ imagination often goes to “dark places” in the face of uncertainty, but this week they might have overreacted, according to Kara Murphy, the chief investment officer of Kestra Investment Management. The multiple blows from Covid and a new hawkish tilt to the Federal Reserve is similar to what we saw over the summer, Murphy said in an interview with Bloomberg’s “What Goes Up” podcast. Back then, traders were also preparing for more Covid cases and stimulus withdrawal. But this time around, markets are better able to handle a setback, if there is one, she said. Below is a condensed and lightly edited transcript of Murphy’s conversation with Bloomberg. Click here to listen to the full show and subscribe on Apple Podcasts, Spotify or wherever you listen.
Brief: The Bank of England’s leading inflation hawk said there could be advantages from waiting for more data on how the omicron variant of the coronavirus will impact the U.K. economy before raising interest rates. Michael Saunders said omicron will be a key issue at the BOE’s next meeting on Dec. 16, adding to speculation the central bank may delay a move until next year as it awaits more news on the new strain. Markets pared bets on a December hike after his speech on Friday. Investors now anticipate a 33% chance of such a move, down from 56% on Thursday. Last month, markets signaled that tightening this month was all but certain.
Brief: Alphabet Inc.’s Google is once again pushing back the date it will require employees to return to U.S. offices on renewed concern after cases of the Covid-19 omicron variant have been confirmed, executives told employees on Thursday. Google had set Jan. 10 as its return date, asking a bulk of its workforce to come in three days a week. Chris Rackow, a Google vice president of security, emailed U.S. staff on Thursday that the company was “going to wait until the new year to assess” a full return, according to a message viewed by Bloomberg News. CNBC earlier reported the news. The Mountain View, California-based company has committed to a “hybrid” system, allowing certain employees to switch offices or work remotely, but encouraging most to return. “At present, given the new omicron Covid variant has only been detected quite recently, there could be particular advantages in waiting to see more evidence on its possible effects on public health outcomes and hence on the economy,” Saunders said.
Brief: During a period of volatility triggered by the emergence of the omicron variant, investors dumped European stocks to the benefit of U.S. peers, maintaining one of the main themes of this year’s market rally. The region’s equity funds experienced $2.8 billion outflows in the week through Dec. 1, the most since October 2020, Bank of America Corp. strategists said, citing EPFR Global data. By contrast, their U.S. counterparts had the largest inflows in four weeks at $10.2 billion. The flows are borne out by market movements. The MSCI Europe Index has fallen about 5% since a record high on Nov. 17, double the drop of the S&P 500 over the same period.
Brief: Canada’s biggest banks shelled out 18 per cent more for bonuses, unleashing the biggest increase in data going back nine years as the firms battled for talent to take advantage of a boom time in capital markets. The country’s six largest lenders set aside $19.1 billion for performance-based compensation in their 2021 fiscal year. The increase trounced the 6.3 per cent average for the past decade. Except for Toronto-Dominion Bank, all of Canada’s other six largest lenders increased bonuses by the most in data going back to 2013. Canada’s banks are riding high on almost two years of torrid activity in capital markets, starting with an early-pandemic increase in trading that gave way to a surge in equity and debt financings and more recently a flood of mergers and acquisitions. That boom, and expectations that it will continue next year, have heightened the competition among banks to attract and keep top talent.
Brief: Stocks notched their biggest advance since October as dip buyers scooped up some of the hardest-hit shares during a two-day selloff. Treasuries retreated. Companies that stand to benefit the most from economic growth drove gains in the S&P 500, with small caps and travel stocks surging. The Dow Jones Industrial Average climbed almost 2%, led by aerospace giant Boeing Co. Tech shares underperformed. The U.S. is inching ahead on efforts to boot Chinese firms off stock exchanges for not complying with disclosure requirements. Volatility has gripped financial markets this week, stirred by Federal Reserve Chair Jerome Powell’s hawkish tone and the spread of the omicron coronavirus strain. The turmoil may offer investors a chance to position for a trend reversal in reopening and commodity trades, according to JPMorgan Chase & Co. strategists. While it’s likely that the variant is more transmissible, early reports suggest it may also be less deadly, they added
Brief: Worries over surging inflation and a new variant of the coronavirus are roiling the U.S. corporate junk bond market, though some believe the tumble could draw investors seeking higher yields. November marked the worst month since the start of the pandemic for the bonds of low-rated companies, with high-yield bonds notching an average return of minus 1.03%, the lowest since March 2020, according to Morningstar Direct data. Spreads, which indicate the yield premium investors demand to hold junk-rated debt over safer U.S. Treasuries, also widened the most since the beginning of the COVID-19 pandemic. Among the factors driving the moves were fears that higher inflation will force the Federal Reserve to normalize monetary policy faster than expected, as well as a rush away from comparatively risky assets on worries over the Omicron variant, analysts said. “With most managers sitting on healthy returns for the year, there’s a bit of de-risking as well,” said John McClain, portfolio manager at Brandywine Global Investment Management.
Brief: 'For people doing IR, I think this pandemic has been so fundamental in terms of changing their daily lives,’ says Thomas Kudsk Larsen, talking to IR Magazine about why he made the move from pharma giant AstraZeneca – made a topic of household debate across the globe by the pandemic – for Swedish small-cap biopharma firm Sobi (short for Swedish Orphan Biovitrum) where he now serves as head of communication and investor relations. Part of the issue is the nature of investor relations itself. As such an outward-looking profession – where the job is really about talking to people, whether investors, management, other departments or external stakeholders – much of what Larsen says was important to him about the job has changed. Outside of the busy quarterly results periods, IR people are usually out and about having meetings, holding site visits or traveling to conferences and busy roadshows. Of course, all that stopped with Covid-19 and, although virtual stepped in, for people like Larsen who thrive from that personal contact, something vital had been lost. Many believe things won’t go back to the way they were either: four in five IROs believe the experience of Covid-19 will lead to a permanent change in roadshow activity, according to IR Magazine’s Global Roadshow Report 2021, with more than a third strongly believing we will not see a return to the pre-pandemic norm.
Brief: The recent market turmoil caused by the emergence of the omicron virus strain may offer investors a chance to position for a trend reversal in reopening and commodity trades, according to JPMorgan Chase & Co. While it is likely that omicron is more transmissible, early reports suggest it may also be less deadly, which would fit into the pattern of virus evolution observed historically, strategists Marko Kolanovic and Bram Kaplan wrote in a note Wednesday. This might ultimately be a positive for risk markets because it could signal that the end of the pandemic is in sight, they said. “Omicron could be a catalyst for steepening (not flattening) the yield curve, rotation from growth to value, selloff in Covid and lockdown beneficiaries and rally in reopening themes,” the strategists said. “We view the recent selloff in these segments as an opportunity to buy the dip in cyclicals, commodities and reopening themes, and to position for higher bond yields and steepening.” The emergence of the new virus strain has roiled markets in recent days, with countries around the world stepping up travel restrictions.
Brief: The number of acquisitions made by private equity-backed businesses across the UK shown signs of stabilising after a buoyant period, according to Rickitt Mitchell’s Buy and Build Barometer. The latest analysis from the corporate finance firm, conducted in partnership with Experian Market iQ, reveals 125 deals were completed in Q3 2021, down 25 per cent on the second quarter of the year. Bolt-on transactions had hit a record high in Q1 2021, with 196 completed at a value of GBP2.3 billion. In the regions, the South East (16), East of England and London (both 14) continue to be the best performing areas for dealmaking, while Yorkshire is outperforming the rest of the Northern regions with 11 transactions completed during Q3) – a record amount for the area. Figures from the Buy and Build Barometer suggest that deal values accumulated this year have also followed a similar trend, with Q3 figures decreasing by 75 per cent to GBP235 million from GBP943 million in Q2 2021. While the number of transactions completed reflects the same number of bolt-on deals as in Q2 2020, the value of the deals has retracted year-on-year by 25 per cent from GBP313 million.
Brief: Legendary investor Ray Dalio has warned people against trying to time the market as uncertainty about the Omicron coronavirus variant shakes stocks. Dalio told CNBC on Tuesday that the most important thing for investors is to be in a safe, well-balanced portfolio and to not try to be too smart. "You will not market-time this. Because even if you were a great market timer, the things that are happening can change the world, so it changes what should be priced into the markets," he told CNBC's Andrew Ross Sorkin. The discovery of a new coronavirus variant, which the World Health Organization has called Omicron, has triggered volatility in stocks after a placid period for the market. The US benchmark S&P 500 index dropped 1.9% Tuesday, after Moderna's CEO said existing vaccines were unlikely to be as effective against the new virus strain. Scientists are rushing to find out more about Omicron. In the meantime, investors have been left guessing about the possible economic impacts. Many analysts have recommended staying invested and said that the fundamentals of the US stock market still look sound.
Brief: Stocks pared gains in another session of intense volatility, with traders assessing the latest news about the omicron coronavirus variant. South Africa said the daily number of confirmed COVID-19 cases almost doubled from Tuesday, while the World Health Organization’s chief scientist noted that vaccines will likely protect against severe cases of the new strain. Federal Reserve Chair Jerome Powell reinforced his message that the central bank would keep inflation in check and said for the second time in two days that officials should consider speeding up how quickly they withdraw policy support. Individuals stuck to their dip-buying ways on Tuesday, plowing a net US$2.22 billion into the market, a single-day record, data compiled by Vanda Research show. That brought net purchases over the past week to US$7.36 billion. Retail traders preferred to snap up index-tracking exchange-traded funds as well as large-cap technology companies.
Brief: CTAs and trend-following hedge funds have seen their recent advance halted, as anxieties over the new Omicron variant of Covid-19 punctured market momentum towards the end of last month. CTAs and other managed futures strategies had started the final quarter of 2021 on a high, with solid October gains. But Société Générale’s main CTA Index was set to finish November down 2.64 per cent earlier this week, reversing October’s 2.56 per cent gain. The index – which charts the daily performances of 20 of the largest CTAs, including funds run by brand-name firms such as Man AHL, Graham Capital, Systematica, AQR, and Aspect Capital – remains up almost 7 per cent over the 11 months since the start of 2021. Meanwhile, SocGen’s trend-following benchmark, the SG Trend Index, remains in double-digit territory year-to-date, having climbed 10.64 per cent since the start of 2021, despite ending November in the red
Brief: U.S. companies, from United Airlines Holdings Inc. to Citigroup Inc., are requiring employees to get vaccinated or risk losing their jobs. The situation looks very different in Europe, even as Covid-19 cases surge anew and governments take an increasingly tough line. With rules around privacy making corporate “no jab, no job” mandates challenging, many European businesses are using subtler measures to convince workers to get immunized against the coronavirus. Stellantis NV, the maker of Fiat, Peugeot and Chrysler cars, insists on its U.S. workers getting inoculated, a spokeswoman said. In Europe, it uses a lighter touch, making employees sign declarations that they’re symptom-free or haven’t been in contact with an infected person for two weeks. “It’s a lot more gentle encouragement,” said Deborah Margolis, a senior associate at labor law firm Littler in London, referring to the European way. “Rather than that sort of heavy-handed approach.”
Brief: The emergence of a new coronavirus variant increases the uncertainty already weighing on the global economic outlook and highlights vaccination shortcomings, according to the OECD’s chief economist Laurence Boone. While the Paris-based organization didn’t directly account for omicron in its new outlook, published Wednesday, it emphasized continued pandemic risks and urged governments to address low inoculation rates in some regions so as not to create “breeding grounds for deadlier strains.” “We are concerned that omicron strain is further adding to high levels of uncertainty and risks and that could be a threat to recovery,” Boone said in a presentation of the OECD’s report in Paris. Vaccinating more people “remains the most important priority for ending the pandemic and also for tackling the imbalances that are plaguing the recovery.”
Brief: Stocks of the nation’s largest office REITs moved lower again Tuesday, as the office market faces new concerns over the Omicron variant of Covid. This comes on top of a new cooling in office demand, which had been improving sharply in the first half of this year as Covid19 vaccinations promised a safe return to work. Stocks of the largest office REITs, like Boston Properties, SL Green, Douglas Emmett and Alexandria Real Estate Equities all fell sharply Friday, when news of the variant spread, and have yet to recover. These stocks had been surging, up around 25% year-to-date. The S&P 500 also fell on Tuesday, down more than 1.5% in morning trading. New demand for office space fell in October to the lowest rate since the first quarter of this year, according to a new report from VTS, a commercial real estate asset management company. That is the second straight monthly decline. Since peaking in August of this year, demand is now down 30% nationally.
