Asian/European Markets

Hydrogen’s potential as an energy source is attracting renewed attention. It may take 20 years or so for the potential to be realized. But the effects are likely to be felt within the planning horizons of most long-term investors—a good reason to start thinking now about the investment implications.

The energy sector is beginning to adapt to the realities of climate change. Who is best positioned for the future?

The GMO Asset Allocation Team has released its latest 7-Year Asset Class Forecasts through January 2021.

Weighing the costs of global vaccine access, minimum wage and the energy rally.

Many investors think there are only two options in a market where participants have become overly exuberant, either 'I want in' or 'Get me out.' Our strategies are more nuanced, and we believe fit better with what we expect to transpire.

Rather than going deep into one theme, this week we will do a “Random Thoughts” from the Frontline. Today we will cover several topics in shorter form: valuations, infrastructure, the debacle in Texas, and a lot more.

Millions of Texans were without power this week when the state was hit with a record setting winter storm. An overhaul of its aging infrastructure would require massive amounts of metals and other materials, which would be positive for miners and producers.

In late 2020, a new kid emerged on the bargain-of-the-decade block. UK stocks, and notably UK value, reached very cheap levels relative to value stocks in other developed economies. Today, UK value remains at remarkably low valuations relative to most of its fundamentals.

A strong economic rebound is expected towards the middle of the year, followed by a return to more normal growth in 2022.

It’s tempting these days for some investors to question the role of fixed income in portfolios. After all, real yields have plunged, potentially leading to less income today and smaller capital gains tomorrow.

The Year of the Ox looks bullish for China with economists and analysts forecasting GDP growth of 8.1% and earnings growth of 18% for the MSCI China Index. But February holds key developments for China that could impact this outlook, including stock delistings, trade, and COVID-19.

For a variety of reasons, many investors are worried about higher inflation. While we may see reflation (a pickup in prices that were restrained due to the pandemic), a significant increase in underlying inflation appears unlikely.

New virus variants are stoking COVID-19 angst, but we see vaccination programs opening the door to economic and market recoveries.

Although US technology equities tend to dominate the conversation about technology investing, Franklin Equity Group’s John Remmert and Don Huber believe there are many innovative international technology companies that tend to get overlooked.

The Emerging Markets (EM) asset class is often labelled a commodity play for investment purposes. The argument is simple and directional; EM countries export commodities, so rising commodity prices are good for the asset class, whereas falling commodity prices hurt EM countries.

Emerging market equities have historically provided investors with outsized returns but have also been the biggest decliners during global equity market pullbacks. For the last 10 years they have lagged the performance of US Equity markets by a considerable margin. But with attractive relative valuations, higher earnings growth forecasts, and underrepresentation in global portfolios, we believe they are set to reverse that trend and outperform US markets over the next 5-10 years.

Despite questions over financing the European Union’s (EU’s) new Green Deal, the green transition is now under way.

Are proposed fiscal policies and student debt forgiveness too much of a good thing?

If, however, the pandemic continues into summer, it will mean the Gripping Hand is still squeezing us. Employment won’t recover and more small businesses will fail. This relief package, as large as it is, may prove necessary and maybe even too small.

Happy Year of the Ox! Today China and a number of other Asian countries celebrate the Lunar New Year, also known as the Spring Festival.

Rob Arnott: “There hasn’t been a better time to be a value investor at any other time in my career. I look back at the tech bubble and I never thought I would see valuations stretched the way they were then. We're back to that, and then some." We invite you to revisit “Reports of Value’s Death Have Been Greatly Exaggerated” now published in the Financial Analysts Journal.

Hope is high that economic growth will accelerate as more people are vaccinated against COVID-19, but so far economic data has been lackluster. Meanwhile, bond investors are expecting inflation despite signs that the economic recovery’s momentum may be stalling. Why does everything seem so disconnected?

Stephen Dover, our Chief Market Strategist and Head of Franklin Templeton Investment Institute, shares four investment themes he’s thinking about as the world recovers from the COVID-19 pandemic.

By buying or overweighting characteristics-based factor exposure and selling or underweighting beta-based factor exposure, investors can position their portfolios to reap the rewards of factor investing while bearing less risk.

Our Fixed Income CIO Sonal Desai shares her investment views and strategies for the post-pandemic recovery. She explains why inflation looks likely to gain steam, and how the balance of fundamentals and valuations become especially crucial today when looking for attractive returns in fixed income.

Rick Rieder and team think that today’s potent policy cocktail holds important implications for the path of economic growth, markets and the value of a dollar.

Any surge in inflation will likely not last for long, but Italy's economic troubles and the shift in rental markets may endure.

It’s hoped that an extra $1,400 in the pockets of everyday Americans may help support lagging U.S. consumption. We believe the stimulus, along with improved vaccine roll out, may also help support commercial air travel.

Today I want to discuss an arcane-sounding but incredibly important term you need to know: Yield Curve Control. Several central banks are already using it and I see a strong possibility the Fed will join them. But first we must again consider the Gripping Hand.

With the previous week’s short-squeeze headlines behind us, investors remained optimistic about a fiscal support package, which passed the Senate by a vote of 51-50, with Vice President Harris breaking the tie.

CIO Robert Horrocks, reviews a topsy-turvy 2020 and shares the reasons for his relative optimism for Asia and the emerging markets in 2021.

Heightened global economic risks mean that many poorer countries could take years to return to their pre-pandemic growth trajectories. And if higher inflation leads the US Federal Reserve to raise rates somewhat sooner than it currently plans, emerging markets will be hit particularly hard.

Commercial aviation still has some challenging times ahead of it, but I believe the worst is behind us, meaning now may be an opportune time to get exposure.

Despite a pandemic, tariffs and superpower political tensions, the resilience of the Chinese economy was clear in 2020. In this issue of Sinology, we highlight five macro trends from 2020 that investors should watch this year.

Massive growth in central bank balance sheets via quantitative easing, debt monetization, and firing of “big bazooka” stimulus packages brings renewed focus to potential shocks in the business cycle. An awareness of the macroeconomic “shocks” and their impact on asset prices should be incorporated in investors’ tactical asset-allocation decisions.

When investors talk about “the stock market” they are most often referring to an index that tracks stocks only in their home country. This “home bias” is evident when it comes to the make-up of investors’ stock portfolios. Investors around the world tend to hold mostly domestic stocks.

February begins with a stack of important economic scorecards. Among them are the last of the fourth-quarter corporate earnings reports, last week’s assessment of the 2020 gross domestic product (GDP), unemployment figures, consumer spending, as well as all the other regular reports that give us a snapshot of our recent economic history.

Corporate earnings are likely to be strong in 2021, reflecting strong consumer demand and resilient cash flows.

The UK-EU trade agreement entered into just before Christmas is a 1,200-page monster which contains far more cons than pros for the British economy despite Boris Johnson doing his very best to convince the British public of the opposite. In this month’s Absolute Return Letter, you can see why.

Emerging markets seek a sustainable solution to debts, and the Fed takes a step toward sustainability.

The Fed recognizes their ongoing monetary interventions have created financial risks in terms of asset bubbles. They are also aware that most policy tools are likely ineffective at mitigating financial risks in the future. Such leaves them being dependent on expanding their balance sheet as their primary weapon.

Those of you with kids and grandkids may at some point have stepped inside a GameStop. If so, you might be familiar with the video game retailer’s tagline: “Power to the players.”

I’m often asked if I foresee inflation or deflation. Both are possible in their own ways, and frankly I feel a little funny telling people I think we will see both. I would just like to have a growing economy and dependable money that holds its value.

It may seem shocking, but a simple trip to the local store to pick up fresh produce or clothing could enable human exploitation. For investors, those same connections can exist within their portfolios—and it takes more than a passive effort to root them out.

A majority of the Senate (including two Democrats) has agreed to forego efforts to eliminate the filibuster during the Congressional term ending December 2022.

Inflation will likely heat up in the coming months, but not to worrying levels.

Precious metals in general did very well in 2020, and I expect them to keep pace in 2021, supported by heightened efforts in the U.S. and elsewhere to transition from fossil fuels to renewable energy.

As China begins the year of the Ox, many investors are wondering whether another bull run is possible in 2021. Given that last year’s rally was extremely narrow, we believe many parts of the market still offer pent-up recovery potential.