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From the outside looking in

Those with a yearning for stability could do worse than choose Japan in 2017, according to BNY Mellon’s Miyuki Kashima.  The year ahead looks bright for the world’s third largest economy, she says.

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 T4826 Kashima BNYAM 427 001

Onwards and upwards

Increased state intervention – and the greater use by governments of the cheap funding available to the public sector – seems inevitable in 2017 and beyond, says Real Return team leader Iain Stewart. In the minds of policy makers, the transition from low interest rates to no interest rates and the shift from buying government debt (QE) to purchasing other assets appear to represent a logical and seamless progression of monetary policy.

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 T4826 Stewart Newton 427 002

Riding the rental revolution

A booming US rental property sector is attracting new interest from a range of commercial and institutional investors but can this growth be sustained? Here, Amherst Capital Management’s Sandeep Bordia considers the market outlook for 2017.

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 T4826 Bordia Amherst 427 010

Buyback or pay-out?

The US is a market as known for its share buybacks as for its pay-outs. Here John Bailer, US equity income manager at The Boston Company , explores US dividend trends and looks at what income investors might expect in the year ahead. What headwinds do companies face in 2017?

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 T4826 Bailer Boston 427 004

More of the same?

Protectionism may be on the rise but the world is so interconnected today it may not be as far-reaching as some expect and many global companies remain well-situated to maintain delivery of sustainable income in 2017, says Newton global income equity manager Nick Clay.

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 T4826 Clay Newton 427 006

Disruptive forces

With rising global trade barriers, increased uncertainty around the sustained direction of US interest rates and questions over Chinese growth, 2017 could be a watershed year for investors in emerging markets. Here, Rob Marshall-Lee, leader of Newton’s emerging and Asian equity teams, looks at some potential winners and losers.

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Focus on: developed markets fixed income

Ongoing central bank interventions, increased political risk and the potential for rising defaults all look set to be key themes for 2017. Here managers from Insight Investment and Standish ask the question: what could the next 12 months have in store for Fixed Income investors in developed market? 

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 Developed Qanda

Focus on: emerging markets fixed income

In 2016, tightening US monetary policy and collapsing commodity prices were something of a spanner in the works for emerging markets. Does 2017 offer better prospects for fixed income investors? Here, managers from Newton, Standish and Insight consider opportunities in the world’s emerging markets for the next year

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 Emerging Qanda

Focus on: global fixed income

For sovereign corporate debt investors, 2016 offered its fair share of surprises – not least an unexpected vote for Brexit, a rancorous US election and a world of central bank-fuelled negative yields. But could 2017 offer more of the same? Here, fund managers from Insight Investment and Newton give their views on the likely opportunities and challenges over the next 12 months.

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 Global Qand A

Regime change

Despite a steady outpouring of market-moving news over the past year, currencies have largely shrugged off events, causing many investors to expect a new, lower volatility regime in the months ahead. But there are reasons to believe the prospect of higher volatility exists and with it the resumption of currency trends in 2017.

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 T4826 Lambert Insight 427 015

The end of monetary policy?

As global quantitative easing (QE) increases and interest rates outside the US continue to be cut, Insight Investment’s inflation-linked corporate bond manager, David Hooker, assesses the practicality of monetary policy in the coming year.

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 T4826 Hooker Insight 427 009

At the peak

Frothy valuations and a crowded fundraising market mean global returns from private equity may fall in 2017, though it is still expected to outperform more traditional asset classes, according to Siguler Guff’s  Ralph Jaeger.

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 T4826 Jaeger SG 427 003

Globalisation meltdown

De-globalisation trends are rife. As governments retrench to focus more domestically and political change continues unabated, Sinead Colton, head of investment strategy at Mellon Capital, discusses key milestones for the year ahead and what they might mean for global markets and investor expectations.

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 T4826 Colton Melcap 427 005

Rules of engagement

Is the UK likely to become more isolated in 2017 and what will this mean for its economic growth? The renegotiation of its trading relationship with the rest of Europe will be a central focus for the year ahead, with uncertainty likely to continue. Here, UK equity manager Christopher Metcalfe discusses what may be in store, highlighting areas of concern and the sectors that may hold opportunities.

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 T4826 Metcalfe Newton 427 007

Liberté, égalité, Frexit?

France’s unruly elections demonstrate how the sources of political risk facing the eurozone are shifting in 2017 from the European Union’s peripheral member states to those at its core.

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 T4826 Geraghty Standish 427 008

Japan’s productivity paradox (Archived)

Once seen as the crucible of hi-tech approaches to improving productivity, Japan is now better known for its ageing society and persistently anaemic inflation. Under prime minister Shinzo Abe’s latest reforms, however, that could be set to change.

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The never-ending story (Archived)

Since the global financial crisis, forces of change have buffeted the defences of the European Union (EU), threatening to damage it forever. What does the 2016 chapter have in store?

 

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GE104 The Never Ending Story

Weathering adversity (Archived)

Russia defied expectations in 2015 with its response to the twin challenge of western sanctions and plunging oil prices. Here Standish’s Urban Larson and Insight’s Robert Simpson ask what’s in store for the country in the year ahead.

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The big issue (Archived)

Standish’s Raman Srivastava and Newton’s Khuram Sharih consider how increased issuance in 2016 will impact bond market volatility and appeal.

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GE109 The Big Issue

The last 'safe haven' (Archived)

Reversion to mean is a powerful force in markets. For many asset classes currently “priced to perfection” this would represent material losses in 2016. For inflation it could mean significant gains.

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Pg22 23 GE112- safe haven

A multi-speed world (Archived)

In a year marked by a series of record highs followed by major sell-offs across asset classes, investors in 2015 could be forgiven for thinking uncertainty was the new normal. Here Mellon Capital’s Vassilis Dagioglu considers some of the possible causes of volatility in 2016.

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GE114 Multispeed World

External forces (Archived)

UK plc looks set to remain vulnerable to external forces in 2016, with events in China the US and Europe all likely to be key. Here, Newton’s UK equity team looks at the impact of China’s commodity demand on UK ‘mega caps’; healthcare analyst Stephen Rowntree highlights the roadblocks posed by the US for UK pharma; while Newton’s strategist Peter Hensman outlines the potential trade impact of the forthcoming EU referendum.

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Unorthodox measures (Archived)

While many developed Western economies resorted to full blown monetary stimulus in the wake of the financial crisis, Asian countries have been more restrained in their policy response. Here, Douglas Reed, emerging markets strategist at Newton, asks whether 2016 could herald a change.

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Pg24 25 GE108- unorthodox

The cycle turns (Archived)

Rising volatility, increased leverage and escalating defaults all suggest a challenging backdrop for fixed income in 2016, but do recent data point to a credit cycle tipping point?

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GE120 The Cycle Turns

Filling the funding gap (Archived)

The impact of ongoing regulatory change in the banking sector is just one factor likely to drive demand for non-bank lending in the year ahead. Here, Alcentra chief investment officer Paul Hatfield explores the latest market trends, investment opportunities and outlook for the sector in 2016.

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Pg6 7 CP16250 Funding Gap

Retreating expectations (Archived)

With global growth in retreat, 2016 looks set to present the world’s central banks with a dilemma: should they continue with QE or will they be looking at new ways of inflating their way out of debt?

 

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Pg12 13 GE110 - retreating

Benefits of the campaign trail (Archived)

A year of political uncertainty lies ahead for the US, creating winners and losers among industries and companies. Here we look at a few of the industries likely to be affected and discuss the challenge of investing in today’s political and economic environment.

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Campaign Trail

Liquidity constraint (Archived)

With expected continued volatility and the implementation of further far-reaching financial regulations in the US and Europe, 2016 is likely to see liquidity remain on centre stage.

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Global outlook: Rates, recession and recovery (Archived)

The US Federal Reserve (Fed) is likely to raise rates by September, according to economists at Boston-based Standish.The group’s chief investment officer, David Leduc, says US growth will continue for the remainder of 2015 albeit at a slower pace than originally forecast as the headwinds faced in the opening quarter of the year will prove difficult to shrug off entirely.

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US Rate Hikes To Take Centre Stage Thumbnail

The waiting game (Archived)

Latin America’s leading economies are facing serious headwinds but with a raft of upcoming elections in the second half of the year there may be scope for optimism say Insight’s Colm McDonagh (head of emerging markets fixed income) and Rodica Glavan (emerging market fixed income portfolio manager).

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The Waiting Game Thumbnail

The road ahead (Archived)

While the concept of driverless cars once conjured visions of a distant high-tech future, new manufacturing and scientific techniques look set to make their introduction a reality - bringing a potential raft of new social and economic benefits.

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The Road Ahead

Active versus passive nears tipping point (Archived)

As many market indices have romped to all-time highs, faith in active managers to relatively outperform is being tested. But Walter Scott Investment Management argues increasing allocation to passive funds poses a number of potential problems over the long term.

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Active Versus Passive Nears Tipping Point Thumbnail

US housing stands on firmer ground (Archived)

With the US housing economy still in recovery mode more than six years on from the peak of the financial crisis, what do the coming years have in hold for US housing and what role do the so-called ‘millennials’ have to play in this story? Carl Guerin, research analyst and Raphael Lewis, primary research analyst on The Boston Company’s US Opportunistic Equity team, discuss.

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US Housing Building Momentum 400X250

Holding the faith (Archived)

Global market uncertainty is prompting China to find new ways of boosting domestic growth. But, despite the many challenges facing the Chinese government, its economic plans remain broadly on track and ongoing reforms could deliver significant long-term gains, says Amy Leung, a member of Newton’s Asian equity team.

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Is China Behind The Game 400X250

London office space remains in high demand (Archived)

While London’s residential property prices may be making the headlines in the UK, it is the capital’s seemingly evergreen office rental market that continues to attract investors from home and abroad. This trend looks set to endure throughout the second half of 2015, according to Alan Supple, managing director, global real estate securities at BNY Mellon Investment Management EMEA Limited (as UK representative of CenterSquare Investment Management).

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London Commercial Property 400X250

Dilma's dilemma (Archived)

Political uncertainty may have subsided following the election but with the Brazilian economy in the doldrums and commentators banging the drum for harsh reforms, what are the prospects for the dilapidated poster-boy of South America?

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Can Brazil Wake From Its Slumber 400X250

Dancing to a different tune (Archived)

Fear and greed drive financial markets: with so much uncertainty with regards to the contrasting economic prospects around the world over the next 12 months, fear currently has the upper hand.

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Absolute Interset Rates 400X250

Across the spectrum (Archived)

Against a low interest rate backdrop, Paul Hatfield, chief investment officer and head of the Americas at Alcentra Group, explores the latest developments in the credit and loan market sector.

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Across The Spectrum 400X250

Bringing it all back home (Archived)

As the UK coalition government strives to rebalance the national economy, so called ‘reshoring’ looks set to play an increasingly important role in economic recovery, with similar opportunities emerging in the US.

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Reels

Will a tightening US labour market mean inflation and higher interest rates? (Archived)

As the US economy continues its slow recovery, investors are focusing their attention on the role falling unemployment and the potential for rising wages may play in fueling a broader rise in inflation and higher interest rates. BNY Mellon chief economist Richard Hoey says that both wage inflation and core inflation in the US have recently bottomed. “We believe that they have begun a gradual, multiyear uptrend which will not end until 2017 or 2018 in an environment of restrictive monetary policy,” he says.

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City People

Having an absolute focus (Archived)

Investors need to choose their absolute return fund wisely as too often many are overly correlated to the equity market and long-only funds, providing little by way of diversification or bond-like volatility, according to Insight fund manager Andy Cawker. Here he discusses why today, in an environment of subdued economic and investment growth, limiting drawdowns has become ever more important.

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Focus

Beware of hidden dangers ahead (Archived)

Despite an apparent transformation of UK economic prospects, Iain Stewart, head of Newton’s Real Return team, believes wider policies designed to manufacture growth could pose significant long-term risks to recovery both at home and abroad. 

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Beware Of Hidden Dangers Ahead

Making 'Abenomics' work (Archived)

Japan’s employment market is showing signs of better health as a result of wider economic reforms pressed through by Prime Minister Shinzo Abe, leading to some managers becoming more positive in their outlook.

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Making Abenomics Work

Mexico’s reformation remains on track (Archived)

The rising star of Latin America, Mexico is in the process of undergoing far-reaching and progressive reforms after a period of lacklustre administration in the country. Energy, telecoms, labour and tax are central to these plans but with political infighting delaying their implementation, can the country grasp this opportunity with both hands? Sophia Whitbread, emerging market portfolio manager at Newton, looks at the reforms, the underlying challenges to change and the potential long-term benefits for Mexico.

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Cactus

US energy evolution (Archived)

The US ‘shale revolution’ has reignited talk of the US achieving energy self-sufficiency. While this may be a far-off aspiration, Robin Wehbé, portfolio manager and head of the natural resources research team at The Boston Company Asset Management, explains how investors are likely to see further evolution in the oil and gas industry into 2015.

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Gas

Changing perspective on the ‘periphery’ (Archived)

Attitudes towards the ‘periphery’ of the eurozone have undergone a sea change, with government borrowing costs pushed to historic lows. While this stands in marked contrast to the height of eurozone crisis, Standish and Meriten examine the prospects for the asset class and its risks.

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Perspectives

Work in progress (Archived)

As global markets continue to reach for recovery, analysts are increasingly studying employment and wage figures and policies closely in their quest for meaningful indicators of the next fixed income trends.

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Painting

Healthy prospects (Archived)

Growing medical demand and a new wave of industry innovation are creating exciting new investment prospects in the US healthcare sector, according to BNY Mellon’s private equity affiliate, Siguler Guff.

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Pills

Japan at Inflection Point (Archived)

The recent political and economic turnaround in Japan is only the beginning of a long-term economic recovery, says Miyuki Kashima, head of BNY Mellon Investment Management’s Japan equity team. With an unprecedented political will and support for reform in place, she believes Japan is at a major inflection point.

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Japan

Local stories dominate EMD opportunities (Archived)

What does 2014 have in store for emerging market debt? From the chances of continued volatility to areas of potential downgrade, BNY Mellon Investment Management explores the appeal of the asset class with Insight Investment’s Colm McDonagh.

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Hong Kong

Standish sees revival in demand (Archived)

Standish sees increasing interest from investors in emerging markets debt (EMD). The sell-off in the summer of 2013 has helped to make EMD valuations more attractive, according to the fixed interest specialists.

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Bike

Issuance on the rise (Archived)

Paul Hatfield, chief investment officer at Alcentra believes 2014 is an attractive year for senior secured loans with a backdrop of high rates of recovery and low defaults in both the US and Europe.

 

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Balloons

Unconventional fix (Archived)

Iain Stewart, who heads Newton’s Real Return team, expects policymakers will continue to walk a tightrope between generating economic growth at almost any cost, and maintaining real interest rates at low enough levels to service liabilities that are unprecedented in peacetime.

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Spain

Elections take front seat (Archived)

Emerging and Asian markets take centre stage in 2014 and not just because of the Winter Olympics and World Cup; a number of key elections are also likely to draw attention. BNY Mellon’s Emerging Income and Asian Income Fund Managers, Sophia Whitbread and Caroline Keen, talk about what the year may hold.

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Forbidden City

A time to be flexible (Archived)

Exposure to alternative assets, unloved areas and short durations are all ways bond investors might achieve returns in 2014, according to fund managers from Meriten and Insight Investment. Investors need to be acutely aware of how bond funds are being managed to ensure they are not overly vulnerable to liquidity shocks.

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London

The evolution of absolute return (Archived)

Could a sustained economic recovery render absolute return funds redundant in 2014? Absolutely not, according to BNY Mellon Investment Management. Today there is more emphasis on the journey rather than the end game. There is a swathe of the investment community that doesn’t want too rocky a ride... absolute return investing is coming of age.

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Berlin

Jab in the arm for healthcare R&D (Archived)

A shift towards more targeted health care treatments, the advent of new technologies, US reforms and Chinese developments make for attractive prospects in the global health care sector. “As people live for longer and lifestyles across developed and emerging markets improve, it is those conditions associated with older age and a richer diet and lifestyles which are becoming greater concerns for society”

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Jab

Light at the end of the regulatory tunnel (Archived)

In May 2014, European Parliamentary elections could change the focus of the regulatory agenda, offering a silver lining for intermediaries. BNY Mellon Investment Management's head of product development, Gerald Rehn, reports on the key opportunities and concerns facing the European investment and advice industry.

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Light At The End Of The Tunnel

Market Overview: Developed world to lead 2014 global growth (Archived)

BNY Mellon chief economist Richard Hoey expects the lead engine for global growth in 2014 to be developed economies supported by aggressively easy monetary policy and continued post-financial crisis recovery. Hoey sees global GDP growth in 2014 accelerating by 0.5%-0.75% from the average pace near 3% in 2012 and 2013. The four main causes of that faster growth, he says, should be:

1 Past and ongoing monetary ease
2 Reduced fiscal drag
3 Moderation in the post-crisis deleveraging of the private sector
4 Moderate energy prices, given the expansion of new sources of energy supply, especially in the US.

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New York