Brief: Legendary macro hedge fund manager Paul Tudor Jones expects "an explosion" of economic growth next year as a coronavirus vaccine becomes more widely available. As the federal government moves quickly to approve and distribute experimental inoculations from Pfizer (PFE)-BioNTech (BNTE) and Moderna (MRNA), Wall Street’s becoming increasingly bullish on 2021. Reflecting that mood, the CIO and founder of Tudor Investment Corp., expects risk appetite to rebound even further, especially with Congress and the Federal Reserve pumping more stimulus. "I think the stock market's on a combination of fiscal monetary pulse that we've never seen before in history, nothing like this,” Jones told Yahoo Finance in an exclusive interview on Wednesday. For that reason, stock multiples are frothier than in the year 2000, when the tech bubble sent the Nasdaq to its first historic high. And he anticipates a COVID-19 vaccine will jumpstart economic growth, which may have potential political implications. "The vaccine's going to bring us back. We're going to have an incredible growth rebound,” the investor predicted, as pent-up demand from the last year gets carried forward in a big way.
Brief : Investors plan to double their allocations to sustainable products over the next five years, according to BlackRock’s Global Client Sustainable Investing Survey, which finds that the pandemic has accelerated investor demand. One fifth of those surveyed said that the pandemic would actually accelerate their sustainable investing allocations. “The tectonic shift we identified earlier this year has really taken hold, as the convergence of political and regulatory pressures, technological advancements and client preferences have pushed sustainability into the mainstream of investing,” says Mark McCombe, chief client officer at BlackRock. “The results of our survey show this sustainable transition is occurring all around the world.” The survey gathered insights from 425 investors in 27 countries, including corporate and public pension plans, asset managers, endowments, foundations, and global wealth managers with nearly USD25 trillion in assets under management (AUM). The survey suggests this is the beginning of a sustained shift for at least the next five years, with survey respondents planning to double their Environmental, Social and Governance (ESG) assets under management (AUM) by 2025. While growth in sustainable assets is most pronounced in Europe, it is also growing in prominence in the Americas and Asia-Pacific as well.
Brief: Investors piled back into value stocks as November’s twin breakthroughs in the search for an effective vaccine against Covid-19, by Pfizer/BioNTech and Moderna, renewed optimism and prompted a huge rally in global markets. Value investing has been out of favour this year as the strategy typically favours companies that are more sensitive to economic cycles, such as energy companies and banks. A turnaround in November saw the Russell 1000 Value Index rise by 13.2 per cent, outperforming the Russell 1000 Growth Index, which only registered a 10.1 per cent rise over the month. The year 2021 has already been named “the year of the vaccine” by Bank of America in its monthly survey in November, and the bank says it expects value stocks to outperform growth stocks, and for small-cap stocks to beat large-cap stocks over the year. Ian Lance, co-portfolio manager of Temple Bar Investment Trust, and portfolio manager at RWC Partners, believes that a vaccine could be “the catalyst” for a sustained move toward value investing. “As the Pfizer vaccine receives UK regulatory approval, and with it the promise of return to a somewhat normal life, now may be the signal many investors have been waiting for to re-allocate away from growth to value,” says Lance.
Brief: Asset management firms are putting technology upgrades in artificial intelligence and automation aside to beef up tech related to remote working, according to a recent survey by consulting firm Deloitte. The survey, conducted in August as part of the firm’s annual investment management outlook, found that asset managers in North America, Europe, and Asia planned to increase spending in areas like data privacy and cybersecurity, which are seen as critical for allowing employees to work from different locations. “Not surprisingly, this indicates that investment management firms are spending in part to support remote and distributed working arrangements brought about by the pandemic,” Deloitte said in the report, expected to be released Thursday. On a net basis, 54 percent of North American firms planned to spend more on data privacy in the coming year, versus 23 percent of European respondents and 36 percent of Asia-Pacific firms. For the latter regions, cybersecurity was seen as the biggest priority, cited by a net 42 percent of European firms and 53 percent of Asia-Pacific respondents. A net 46 percent of North American firms also reported a higher budget for cybersecurity over the next 12 months.
Brief: The impact of COVID-19 on the European leveraged loan market fed through to collateralized loan obligations, with defaults up and loan supply down. A report by S&P Global Ratings said the CLO market was "hit hard by the pandemic." Defaults and CCC-rated asset holdings were up, loan supply fell and CLO managers that chose to trade out of weaker corporate sectors in some cases have experienced par losses, the report said. "All combined, these factors have negatively affected European CLO ratings, largely in the form of CreditWatch negative placements and downgrades of junior tranches," it said. The ratings agency uses CreditWatch and rating outlooks to show its view on how likely a ratings change is and the probable direction of such a change. Since March, S&P has put 39 European CLO ratings on CreditWatch negative, with about two-thirds of those actions subsequently resoled with a downgrade. The average downgrade was one ratings notch. As of Dec. 1, no European CLO ratings were on CreditWatch negative. Pressure on European CLO ratings was predominantly seen in junior parts of the capital structure, at the BB and B-rating levels. S&P's report also noted that moves by managers away from affected names and potential losses — along with "structural mitigants embedded in CLOs — explain why our rating actions on junior CLO tranches have been limited so far. On average, the magnitude of rating changes has been one notch, and to date we have not lowered any investment-grade ratings to speculative-grade."
Brief: Despite an initial freeze in investments early in the year due to the COVID-19 pandemic, U.S. venture capital funding this year has already overtaken 2019 levels as many tech companies got a boost from remote work and an e-commerce boom. U.S. venture capital investments as of Dec. 1 totaled $139.6 billion across 9,898 deals, compared with $137.3 billion across 12,189 deals last year, according to previously unreleased data from PitchBook. That makes 2020 the third straight year for U.S. venture capital investments to exceed the $100 billion mark. Several investors have said that they are betting the pandemic will have the lasting effect of pushing more economic activity online, making up for the businesses boarding up on Main Street. The investors added that they are investing in startups that aim to enable the further digitization of sectors like banking, retail and healthcare. Fintech was a big focus for U.S. venture capital investors in 2020 with trading app Robinhood Markets Inc raising more than $1.2 billion over two deals, alternative lending company Affirm raising $500 million and digital bank Chime raising $485 million.