Scientific studies suggest the world is still on track to exceed the 1.5 degrees Celsius increase in temperature relative to pre-industrial times, by 2050. We collectively need to do more - and the power of private capital has a key role to play.
Key officials at the US Federal Reserve have finally acknowledged that they mischaracterised an inflationary surge that has proven larger and more persistent than they expected. The Fed must now follow up by doing two things quickly.
The idea that duration is to be avoided at this stage of the cycle? It's bad economics, bad market timing, and bad risk management. It's nuts and you can clearly see it's nuts!
The 17 Sustainable Development Goals (SDGs) are vitally important to building a better world for all humanity. Using an SDG framework reduces portfolio risk while making a positive SDG impact.
Unless economists recognise the existence of inescapable uncertainty, there can be no macroeconomic theory, only prudential responses to emergencies.
US President Joe Biden faces a critical decision - whom to appoint as chair of the Federal Reserve, arguably the most powerful position in the global economy. He doesn't have to look far to find someone who has already shown her mettle.
International organisations are currently plagued by allegations of powerful states wielding undue influence over outcomes. But their clout does not render multilateralism impossible.
As we enter the final quarter of 2021, the din of market sceptics continues. The narrative has now broadened beyond peak economic and earnings growth, however, to include peak everything.
Just as banks needed to increase their equity buffers after 2008, we perhaps now need to step back from just-in-time production and redefine productivity in light of supply-chain risks.
Covid-19 is a situation in which an actual virus - as well as new narratives related to it and its associated consequences - began spreading at the same time, with major economic consequences.
After initially and persistently misreading US inflation dynamics, more Fed officials are now starting to come to grips with the situation. The Fed would be well advised to catch up even faster.
Australian cash rates will stay low for decades. Low interest rates mean high asset prices, which means much lower returns ahead. Our client communications must be in tune with this new environment.
Japan is too different from the rest of the world to be used as a road map? Acutally, more often than not, the lessons we can learn from Japan's experience are completely valid in other, very different, economies.
How will the global economy and markets evolve over the next year? There are four scenarios that could follow the mild stagflation of the last few months.
With the US's disastrous exit from Afghanistan, the parallels between the 2020s and the 1970s just keep growing. Has a sustained period of high inflation just become much more likely?
Demand and supply dynamics could lead to 1970s-style stagflation (rising inflation amid a recession) and eventually even to a severe debt crisis.
In the 1990s and 2000s, investors were largely able to ignore the macro picture. But macro forces have reawakened and matter more than ever for portfolios to succeed in meeting client goals in the years ahead.
All markets are embedded in a web of human relations, values and norms. We must rethink the relationship between market and civil society to return to a more secure and stable economic plane.
With attractive valuations and global investors underweight the asset class, the case for a dedicated Emerging Market Debt allocation is growing ever stronger.
We need to consider an expanded set of solutions including hedge funds and private markets so portfolios are truly the ends to the means.
Uncertainty around the inflation outlook is at an extreme – yet a view on inflation is a critical input to building portfolios capable of achieving client goals out into the future.
Three economists describe and debate three plausible, forward-looking economic and market scenarios that have a reasonable probability of occurring during the next two to three years.
Infrastructure plays a key role in the move towards decarbonisation and net-zero emissions. Government policy support and the unprecedented amount of capital required to achieve these targets should change how you think about investing in infrastructure.
Will current elevated levels be sustained? Not likely. Post Covid-19, secular factors such as debt levels and demographics provide even stronger headwinds against inflation than the preceding decade ever did.
Capital markets will be shaped profoundly as the economy transitions from a depletive economic model to a more sustainable one. Such transitions will inevitably create winners and losers.
Our hypothetical Investment Committee considers three relevant economic and market scenarios which have a reasonable probability of occurring, and the asset allocation implications of each.
Established in 2002, Strategies Conference is THE portfolio construction strategies conference of the year. Presented each August, the program features 50+ carefully selected leading investment thinkers who will challenge and refresh your portfolio construction thinking by debating contemporary and emerging portfolio construction strategies, for you to consider applying in practice to build better quality portfolios.
Starting in mid to late 2022, five structural changes will begin to kick in that will drive inflation to between 4% and 6% in the years following 2022. These changes will impact inflation for decades.
Inflation readings in the US have shot up in recent months. At the same time, stock markets are flirting with all-time highs. Something in all this does not add up.
The stability of stablecoins is an illusion. They are unlikely to replace Federal Reserve money, unlikely to revolutionise finance, and unlikely to realise the dreams of their libertarian enthusiasts.
A period of slower, yet still robust, economic and earnings growth will be powerful enough to elongate the current bull market. Long-term investors should take advantage of any market pullback.
How transitory is today's inflation? One camp has a surprisingly strong conviction that the current uptick in inflation will sharply reverse itself. Others, including me, are not so sure.
Activist short sellers have received increasing attention - and notoriety - in recent years. This paper adopts the lens of narrative economics to reveal useful insights into the dynamics of activist short selling.
The stagflation of the 1970s will soon meet the debt crises of the post-2008 period. The question is not if but when.
Emotions generated in the media by way of the words used in turn influence investors decisions, providing the foundation for a highly profitable investment process.
A large and growing body of commentators is warning about the very real possibility - if not outright likelihood - of policymakers unwittingly letting the inflation genie out of the bottle.
farrelly's Dynamic Asset Allocation Handbook (Jun 2021) has been assessed and accredited by Portfolio Construction Forum for Continuing Education (CE/CPD) hours. Those who attend online on-demand must complete a CE Quiz to receive CE/CPD accreditation.
I have long been haunted by the inflation of the 1970s. Fifty years ago, I was witness to the birth of the Great Inflation as a Fed insider. This isn't the 1970s, but today's Fed waxes far too confidently about inflation.
Supply chain inflation has become an increasing preoccupation for economists, corporations and governments, as freight costs have accelerated, commodity prices increased and import prices returned to inflation.
Global financial markets have been reacting to the Covid-19 pandemic since early 2020, providing a unique opportunity for researchers to examine the impact of a global pandemic on uncertainty, investor reactions, and stock prices.
Charles Goodhart, perhaps Britain's most distinguished economic commentator, has just co-authored a book arguing that longer-term inflation will be much higher than the past 35 years. The reason for his view is highly unorthodox - and, in our opinion, correct.
Will inflation in the US this year represent "overheating" of the economy as a whole? Most likely, it will not. And while some worry that we may be returning to the 1970s, this is highly unlikely.
Tough conditions in global supply chains in Q1 2021 - congested logistics networks, continued demand growth and cost inflation - will take much of Q2 2021 to unwind.
I should have known better when I came off the bench as a retired forecaster last summer and penned a piece with the now memorable title of "America's Coming Double Dip".
A generation of great international economists is passing from the scene. Richard Cooper, Robert Mundell and John Williamson each made important contributions on a variety of topics including to the ongoing debate about optimal currency arrangements.
With a healthy consumer, accommodative policy, accelerating GDP and the potential for herd immunity from Covid-19, the risk of a US inflationary overshoot has increased. We believe any inflation scare, however, will be short-lived.
There is a growing debate about whether the inflation that will arise over the next few months will be temporary, reflecting the sharp bounce-back from the Covid-19 recession, or persistent, reflecting both demand-pull and cost-push factors.
The greenback's dominance may well be more fragile than it appears, because expected future changes in China's exchange-rate regime are likely to trigger a significant shift in the international monetary order.
The price of Bitcoin, the canonical cryptocurrency, is so volatile that it is almost impossible to imagine it becoming a reliable store of value or means of exchange.
The same millennials who were shafted over a decade ago are being duped again. Workers who rely on gig, part-time, or freelance "employment" are being offered a new rope with which to hang themselves.
The farrelly's Dynamic Asset Allocation Handbook features editorial exploring investment strategy "hot topics", farrelly's long-term forecasts for asset classes, a detailed review of the long-term forecasts for an individual asset class (rotating across asset classes each quarter) and three asset allocation models to assist with implementation...
Our diverse panel debated which of the high-conviction propositions they heard at Markets Summit 2021 resonated most strongly, which they disagreed with most - and the portfolio construction implications.
Often underrepresented in investor portfolios due to concerns around liquidity, private equity investing with a truly hands-on approach allows active investors to maximise their capital growth potential.
Rather than accepting lower returns for liquidity, investors should go back to the drawing board and re-assess their need for daily liquidity.
The energy transition has the potential to be as transformative for the world economy and geopolitical landscape as the digital revolution has been since the 1980s.
Those who cling to yesterday’s narrative may forego one of the great trades of recent decades as the world shifts to a "global reopening" narrative and away from one of "secular stagnation".
Fiscal stimulus and the vaccine have fuelled an extraordinary rally in equities - but, ultimately, stocks are at record highs because of extraordinarily low market interest rates. Investors should be wary of inflation, but also of being underweight equities.
Covid-accelerated trends - including digitalisation, geopolitical tension and the impact of ESG on the cost of capital - are structural and divergence within equity markets could increase.
With the official cash rate near zero, it's time to head back to the drawing board to find a more consistent source of income. Private debt provides a compelling alternative source of income in a portfolio.
De-carbonisation, company management and ESG scrutiny are diminishing the influence of commodity prices on resources alpha generation. If long term sentiment begins to turn, there is significantly more value to be found in the resources sector.
The 60/40 balanced portfolio needs to be “stretched” or redesigned, to mitigate the impact of low yields on overall portfolio risk and return. Investors need to make their equity allocation work harder and consider new diversifiers.
Supply chain decision makers must continue to focus on mitigating risk in 2021, not maximising growth. Political risks outbalance opportunities.
The consensus view that US equities are in a bubble is overblown. Go back to the drawing board when it comes to your views on US valuations - because this time IS different.
Pent up consumer demand, fiscal stimulus and accommodative monetary policy set the stage for a sharp global recovery. It is back to the drawing board in a high growth environment.
Structural factors will ensure that the cash rate cannot rise over the medium term, resulting in negligible cash returns. A core fixed income exposure consisting of Australian government bonds will outperform cash over the long term.
It's time to construct portfolios with investment strategies designed to advance humankind towards a global sustainable economy, a just society, and a better world.
During 2020, G-REITs experienced a once in a generation demand shock. With new building supply and REIT balance sheets in good shape, G-REITs are well positioned as economies reopen and demand returns. Now is the time for G-REITs.
The Covid-19 pandemic has accelerated profound shifts in how economies and societies operate and is transforming macroeconomic policy, geopolitics and sustainability.
The illiquidity premium offers strong value over the cyclical horizon. A combination of interest rate, credit and illiquidity risks provide diversified fixed income exposures with attractive return potential.
Believe in sustainable investing or not, investors need to understand its impact on investment returns and portfolio construction as capital markets stand on the cusp of a transformation to an ESG world.
Portfolio construction practitioners must go back to the drawing board and focus systematically on the constraints facing global policymakers, in order to successfully extract the implications for portfolios.
Scale-as-a-service cloud computing platforms allow companies - both large and small - to get their IT infrastructure up and running in minutes. Over the next decade, this will have profound implications for the global economy.
The US, Australia and their allies have long depended on global "rules of the game" for their major companies and sectors to flourish. Australia and the US will have to accept that China will play an ever greater role shaping these rules.
The herculean tug of war between stronger economic growth and higher bond yields will be the defining battleground of 2021 and will be accompanied by violent and rapid-fire recalibrations of relative valuations.
As a tumultuous 2020 neared its end, the clouds of uncertainty appeared to be parting. Successful vaccine trials raised hopes that the Covid-19 pandemic would soon be over, the US election result promised a more geopolitical- and market-friendly presidency and government, and rebounding investor confidence fuelled a dramatic rotation into value stocks. Yet that confidence is already being tested in 2021 as new Covid variants take hold, doubts emerge about the efficacy of vaccinations, and the Democrats’ Senate win stirs fears of an aggressive spending, taxation, and regulatory agenda that’s not favourable to business. The geopolitical, macroeconomic and corporate outlook remains unclear, yet stock markets continue to climb this wall of worry. It is time to pause, reflect and go back to the drawing board!
Established in 2009, Portfolio Construction Forum Markets Summit is THE investment markets scene setter of the year. The geopolitical, macroeconomic and corporate outlook remains unclear, yet stock markets continue to climb this wall of worry. It is time to pause, reflect and go back to the drawing board! Markets Summit will help you better understand the key drivers of and outlook for the markets (geopolitical, economic and asset class), and the opportunities and risks ahead, on a three- to five-year view, to aid your search for return and to help you build better quality investor portfolios.
The Investment Management Analyst Certificate (IMAC) advances investment management analyst knowledge, skill and expertise in a definitive set of competencies necessary for building and/or advising on quality multi-manager portfolios. It is both a structured post-graduate certificate course in its own right, and the Australian-based Registered Education Program for the global Certified Investment Management Analyst® (CIMA®) program.
After the First World War, we got the Roaring 20s. Now, a century later, it looks like we are going to do the same again.
The madness at the end of January around a few now-famous stocks can largely be explained by the fact that all of five conditions for market madness were met.
Covid-19 has offered some tough but useful lessons about governance. Many wealthy countries have not managed the crisis as well as many poorer and vulnerable countries.
Economic recovery, like Covid-19 vaccines, will not be evenly distributed around the world over the coming two years. A rising tide of recovery is inevitable, but it will not lift all boats.
In the early and middle stages of an economic expansion, running with the herd can be a beneficial and safe proposition. As this recovery unfolds, should investors break off, worried about the formation of a bubble?
November 2021 will mark the 20th anniversary of the BRIC acronym that I coined to capture the economic potential of Brazil, Russia, India, and China. Many commentators will be revisiting the concept - so here are my own thoughts on the matter.
I believe time allows signals to surface amidst the ubiquitous noise. In the spirit of Annie's "just thinking about tomorrow..." in which she pleads for us to "hang on 'til tomorrow, come what may," I present my 2021 predictions for the coming five years.