Are High Oil Prices a Threat to Investors?
Overall, we view high oil prices as another headwind for expensive growth stocks and potentially European markets, which are more exposed via their reliance on Russian energy exports.
Authored by: Wade O'Brien
Higher Rates Are a Headwind, but US Housing Rests on Solid Foundations
The US housing market has been on a tear in recent years, supported by low interest rates, favorable supply/demand dynamics, and a recent boost from the pandemic-related demand for more space. This publication provides an update on some of the macro forces supporting housing and describes different asset classes that offer exposure to US housing.
Will Concerns Over “Greenflation” Derail the Energy Transition?
No. The inflation attributed to green initiatives (known as “greenflation”) is part of the current inflation narrative, but we doubt concerns related to it will derail the global energy transition.
VantagePoint: Jumpstarting the Energy Transition
This year may prove to be pivotal in the transition from fossil fuels to renewables. Policy makers, businesses, and investors are accelerating commitments to bring greenhouse gas emissions to net zero by 2050, while technological advances and economics in sectors, like renewable energy and EVs, are reaching more competitive functionality and cost. Even as the energy transition gains speed, we are still in the very early days and anticipate a long and disruptive transition.
Many Real Estate Assets Will Be Boosted by Secular Tailwinds
We believe a healthy macro backdrop and strong demand for inflation-sensitive assets will support most real estate assets in 2022. However, given stretched valuations for many core assets and COVID-19–related uncertainty around some sectors, we think return prospects are highest for assets that benefit from secular trends, such as the growing demand for healthcare and broadband.
Expect Lackluster Returns on Most Liquid Credits
Low yields on many liquid credit assets curbed returns in 2021, a trend that seems likely to continue in 2022.
Has the Approaching Debt Default by Chinese Property Developer Evergrande Created Opportunities for Investors?
Yes. In recent weeks, several Chinese property developers have defaulted, and spreads on Chinese high-yield bonds have widened roughly 600 basis points (bps), taking their year-to-date loss to 18%.
Do Prospects Remain Bright for Investors in Japanese Small-Cap Stocks?
Yes. We believe the underperformance of Japanese small-cap stocks in recent years will reverse, boosted by attractive relative valuations, stronger balance sheets, and growing pressure from shareholders and regulators.
US Real Estate Outlook: Patience Required
This paper discusses recent trends in US commercial real estate fundamentals and looks ahead to what might be in store for the remainder of 2021. Overall, we are reluctant to sound overly bullish about the broad asset class, as the outlook for some sectors is unclear. Still, for investors looking to immediately deploy capital, we highlight two categories of opportunities.
Should Investors Be Concerned About the Degree of Concentration in US Equity Markets?
Yes, because rising concentration reflects rising valuations for the largest stocks, which are likely to serve as a headwind to index returns. Further, the growing market share of these companies increases the potential for rising regulatory oversight.