BNP Paribas Asset Management

When leading central banks stop playing the monetary policy tunes that many financial markets have been dancing to over the past decade – that jaunty ditty called quantitative easing, or QE as it is known by its abbreviation – the financial assets that were the winners under QE look set to become the losers, but there is one asset class that should continue to hum along nicely: US mortgage-backed securities (MBS), as fund manager John Carey explains.

The Green Bond Principles define a green bond as any debt instrument whose funds are meant to finance or refinance ‘green’ projects, that is, projects with the ultimate goal of combating climate change or mitigating its impact.

Valuing capital, be it cash, machinery or even human, is a mainstream practice, but viewing the natural environment in the same way is less common, even though impacts upon natural capital can have equally far-reaching consequences, including for investors.

A recent report by nutrition experts from Brazil and Canada concludes that the ever-increasing production and consumption of ultra-processed foods such as sweet or savoury packaged snacks, reconstituted meat products and soft drinks is threatening increased obesity. Not only that, it is also leading to sustainability crises such as the degradation of land and water resources, waste caused by mass animal husbandry, and food and nutrition insecurity.

Our general economic outlook for the rest of 2018 is for continued global growth with low but rising inflation worldwide. In this scenario, we expect major developed market central banks will gradually reduce the extraordinary level of liquidity in financial markets. There are risks of a sudden and unexpected rise in inflation and of trade tensions worsening into a wider trade war.

At a time when many bond investors vacillate between concerns over rising interest rates and the belief that the multi-decade bull market in fixed income is not over yet, emerging market (EM) local currency debt deserves to be given more attention than it often gets these days.

As a key natural resource, water plays a major role in industries across the economy as well as being essential to support life. However, it is predicted that by 2050, 52% of the world’s population will live in water-stressed areas. Balancing demand between agriculture, fisheries, industrial activities and personal use can become more difficult in areas of rising population and/or climatic changes.

In March, Britain and the EU reached a milestone agreement in their Brexit negotiations, but the road to a sensible outcome remains complex and long, with ample opportunity for spats and setbacks along the way.

Last year, a combination of recovering but still below-potential growth and falling inflation allowed the central banks of many emerging markets (EM) to continue easing their monetary policy, even as developed market (DM) central banks, led by the US Federal Reserve (Fed), were shifting into tightening mode.

Financial markets have experienced another bout of volatility, this time related to an escalation in protectionism involving the US and China.