Payments and the future of mobility, keeping risks in perspective, and a neutral view on yields in the near term

Alister Sneddon, CTO

Here are the top 3 insights for June 11th, prepared by Alister, our CTO.

Today’s Brief

• Deloitte: Payments and the future of mobility
• Alliance Bernstein: Debt, Downgrades and Fallen Angels — Keeping Risks in Perspective
• Federated Investors: Federated adopts neutral view on yields in the near term

Payments and the future of mobility

• Leading retailers and technology companies have set a high bar for the financial services industry to create better experiences and simple, seamless integrations that can make traditional banking, payment, and other related activities easier to accomplish.
• The advancement of omnichannel commerce and the presence of leading technology companies have specifically driven the industry to become more open and enable improved payments experiences.
• And payments are already becoming easier: Most commercial websites, browsers, and smartphones can store credit-card information and allow instant payments and transfers to merchants or contacts, and the first stores and restaurants are going cashless.

Genuine Scores for the top 3 IT Services stocks

• Perspecta, 67
• Computacenter, 64
• DXC Technology, 64

Debt, Downgrades and Fallen Angels: Keeping Risks in Perspective

• The market has grown less anxious about an imminent wave of bond downgrades.
• That’s good, because overestimating the risk can lead to missed opportunities.
• But the risk hasn’t disappeared, making research as important as ever.
• At the end of 2018, nearly $140 billion worth of BBB-rated bonds were trading as if they were already below investment grade, reflecting widespread concern about unsustainable corporate leverage.
• That’s the kind of thing bond investors find hard to ignore — with good reason.
• A wave of downgrades could lock in big losses for investment-grade strategies and spark a disruptive repricing in the high-yield market, a risk for high-income-oriented portfolios.

Genuine Scores for top 3 Globally focused Bond funds

• PIMCO Short Asset Investment Fund, 100
• Pioneer Multi-Asset Ultrashort Income Fund, 99
• DFA Two-Year Global Fixed Income Portfolio, 99

Federated adopts neutral view on yields in the near term

• Having fallen significantly immediately following the Federal Reserve’s “no hikes this year” message at its March 20 meeting, Treasury market yields have rebounded somewhat and now appear to have settled around the high point of the Fed’s current target range for the federal funds rate of 2.25%-2.50%.
• Federated’s fixed-income duration committee now perceives balanced risks around market yields moving higher or lower in the near term, prompting a shift to a neutral view on duration.
• Factors apt to keep market yields narrowly range-bound in the near term are dominated by inflation — or more accurately, its lack of acceleration.
• The core PCE price index has hovered at 2% or below on a year-over-year basis, not rising sustainably above the Fed’s 2% target despite a 50-year low in unemployment and an economy on the verge of its 10th year of expansion.
• Without a sustained break higher for inflation, the Fed could be done for this cycle, which would be consistent with a 10-year yield just above 2.50% as historically it converges to the terminal funds rate in a cycle.
• Unless inflation heats up, we might be at that terminal rate.

Genuine Scores for the top 3 US focused funds

• PGIM Core Short-Term Bond Fund, 100
• iShares Ultra Short-Term Bond ETF, 100
• Invesco Ultra Short Duration ETF, 100

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All the best,
Alister and the Genuine Impact Team

p.s. all Genuine Scores are accurate as of the 23rd of April