Investing

The World Bank on Tuesday warned that the global economy is facing a 1970s-style stagflation with a protracted period of feeble growth and elevated inflation.

“For many countries, recession will be hard to avoid,” World Bank President David Malpass said at the presentation of the bank’s latest Global Economic Prospects report, which noted an increased risk of stagflation ”with potentially harmful consequences for middle- and low-income economies alike”.

When it comes to equity valuations, most investors are concerned with the price/earnings ratio. And while that P/E ratio has fallen to just below the average of the past decade, the picture painted by another valuation measure is much less attractive.

Amid lingering fears of stagflation and a possible recession, investors are hard pressed to find opportunities in today’s markets, if any. Market experts at JP Morgan Asset Management believe that those willing to look at fundamental factors underpinning equities, also in Europe, can find ways to enrich their portfolios with some specific quality growth stocks if they know where to look.

The long-term financing of the storage of German commercial radioactive waste is being provided in part through a Luxembourg Raif that was established earlier this year. Kenfo, the German sovereign wealth fund that established the fund, has given InvestmentOfficer.lu some more details about its investment purpose.

The decision is made. The ECB will also raise interest rates now that inflation is showing few signs of cooling. But this also increases the risk of a classic policy mistake.

The US national debt recently passed the 30,000 billion dollar mark. Since March 2020, the US national debt has increased by 7,000 billion dollars. All those “Treasuries” are ultimately part of one’s portfolio. Certainly now that some major buyers have dropped out this year, it remains to be seen whether enough buyers will remain.

Spreads on both corporate and high yield bonds have increased significantly in recent weeks. Nevertheless, especially the spreads on high yield bonds remain too low. Let’s get under the bonnet to explain why this is the case.

As the chart below indicates, corporate and high yield spreads are highly correlated. However, in recent weeks the spread combinations of both asset classes have been in the orange oval, indicating that high yield bonds are on the low side, compared to what you might expect based on history. The last data point is the pink square.

Financial markets do relatively well when it comes to predicting the future. Collective wisdom is ultimately translated into share prices. Index investors benefit from this collective wisdom and are effectively free riders to the hard work of many. Yet in the stock market, it is not easy to distinguish between what is possible and what is real.

Private markets are no longer the exclusive preserve of large institutional investors. A round of questions to Dutch asset managers point to an influx of families and high-net-worth individuals - or HNWIs - as private equity becomes more widely available as an asset class. Their increased appetite for alternative investments is also noted in Luxembourg.

Dislocation of Europe’s energy supplies, inflation, increased interest rates, Covid lockdowns in China… The list of factors creating headwinds for investors is long. A pair of French boutique-fund managers visiting Luxembourg explained that these problems however do not require strategies to be fundamentally rethought.