Aberdeen Standard

It’s been a bumpy – but ultimately positive – start to the year for emerging markets (EM). Investors had a lot to digest, from the volatile US-China trade war to numerous elections around the world. The questions are: what do we expect for the remainder of 2019? And what will this mean for investors?

What is goodwill? In the accounting sense, it’s an intangible asset that arises as a result of mergers and acquisitions (M&A). Essentially, goodwill is the difference between the price paid for a company and its book value. It is recorded on the buyer’s balance sheet, and its value must be tested each year and adjusted accordingly. Any change results in a write-down of this value, which is recorded as an impairment – effectively, a loss.

When most people think of industrial logistics buildings, factors like energy efficiency, technology and carbon innovation don’t usually spring to mind.

Property ESG standards: how tenants, landlords and the planet can happily co-exist

Over the past decade, yields on many developed market bonds have declined materially. In some markets, bond yields have even turned negative with investors effectively paying for the privilege of holding bonds. It is therefore not surprising that many investors have looked for alternative sources of income that also provide protection from rising inflation and interest rates.

The demand for environmental, social and governance (ESG) strategies in real estate continues to grow. Investors are becoming increasingly focused on responsible practices and how these are integrated into funds.

Many investors have historically viewed emerging market (EM) equities as a source of growth, with income a distant consideration. We believe this oversight is a mistake, and that a dividend-focused approach to investing could help boost long-term total returns.

So far, 2018 has been a difficult year for emerging market (EM) assets, which in the last few months have fared significantly worse than their counterparts in developed markets. This has been due mainly to worldwide issues but also country-specific political uncertainty. Many investors are now asking if the sell-off presents a buying opportunity – or are there reasons to remain wary?

It is fair to say that forward guidance doesn’t enjoy a good reputation in the UK. The policy, introduced with some fanfare by Mark Carney on his arrival as Governor of the Bank of England, was meant to give greater clarity about the path of interest rates.

When it comes to Australia, our view within the equities team is one of cautious optimism. What many investors don’t know is that Australia’s economy is heavily reliant on China. In fact, we believe the country’s dependence on China as a trading partner and as a major influence on commodity prices naturally makes China its greatest vulnerability.

Japan has had a sobering 2018 so far, with both growth and inflation coming in below expectations. Is this likely to trigger a policy response, or should we expect more of the same?

2018 has already seen its fair share of surprises. Nearly at the mid-point, we’ve seen a shift (even if temporarily) in US-North Korea relations that was deemed unbelievable just six months ago; the consensus around synchronised global growth has weakened; the US is moving towards protectionism; and the ZTE debacle crushed the myth of world-beating Chinese innovation.

Global equity markets have endured a torrid time in the first few months of 2018. The downturn has reached all regions, as concerns about higher interest rates and a potential trade war between the US and China have escalated. But smaller-cap equities have proven relatively resilient during this turbulent period.

US companies had an excellent beginning to 2018, as shown by their strong first-quarter corporate profits. European businesses, on the other hand, had a less auspicious start, a fact also reflected in their earnings reports. 

Over the past 18 months, the term ‘Goldilocks’ has increasingly been used to describe the global economic climate – neither too ‘hot’ to cause rampant inflation, nor too ‘cold’ to fall into recession.

Seems the cash registers are already ringing in the UK this week. According to consulting firm Brand Finance, Saturday’s royal wedding between Prince Harry and Meghan Markle will boost the UK economy by around £1.05 billion.

The US economic expansion has just become the second longest on record. If it continues beyond mid-2019, it will be number one. Its longevity is probably due to a mixture of circumstances, judgement and luck. The severity of the recession following the global financial crisis (GFC), coupled with the slowness of the subsequent recovery, has played a part. Regulatory reforms to the financial sector, implemented in response to the GFC, may also have contributed. And the fact that the US hasn’t been hit by any shocks of sufficient size to knock it badly off course has certainly helped. But as the economy heads towards that all-time record in 2019, what could bring it back down to earth? And are we capable of predicting the end before it’s upon us?

Under pressure from innovation, demanding clients and Old Father Time, hedge funds face their fair share of challenges. A rapidly evolving environment will spell the end for those who fail to keep pace. But in a Darwinian industry, those who innovate and adapt will ultimately benefit – and so will their clients.