Picking winning markets, when the cycle turns, and can central banks still be effective?

Genuine Impact
Jun 4 · 3 min read
Alister Sneddon, CTO

Here are the top 3 insights for June 4th, prepared by Alister, our CTO.

Today’s Brief

  • Fidelity: Picking tomorrow’s winning markets
  • S&P Global: When The Cycle Turns — ‘BBB’ Downgrade Risks In EMEA Nonfinancial Corporates Appear Manageable
  • Invesco: Can central banks still be effective?
  • A common perception of emerging markets is that they are on a journey towards full maturity, and that a point will eventually come when they stand eye to eye with the world’s developed markets.
  • Even the term ‘emerging’ suggests this process — sooner or later these markets will have, well, ‘emerged’.
  • The problem for investors is that, too often, they can stay emerging forever.

Genuine Scores for the top 3 Global Emerging Markets focused funds

  • BlueOrchard Microfinance, 100
  • DoubleLine Low Duration Bond Fund, 99
  • MassMutual Select Equity Opportunities Fund, 83
  • Gross reported debt of nonfinancial corporates rated in the ‘BBB’ category based in Europe, the Middle East, and Africa has surged by 80% or about $1.0 trillion since 2007 to about $2.2 trillion at year-end 2018.
  • The largest single driver was about $1.5 trillion of debt downgraded from higher ratings, and we believe the most common reason is companies’ increasing risk tolerance.
  • We estimate up to about $250 billion of debt could fall to speculative grade a year in a severe downturn, although this is not our forecast for the next one-to-two years.
  • This is about 10% of the outstanding amount, which we consider manageable for the market to absorb.

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
  • Last week was a momentous one for central banks — the minutes from the March Federal Open Market Committee (FOMC) meeting were released, giving us insight into the Federal Reserve’s views on the global economy and rate cuts, and the European Central Bank (ECB) decided to remain on its ultra-accommodative path.
  • We were reminded that central banks are critical for supporting growth, controlling inflation and stabilizing economies — a task that is growing increasingly difficult as these institutions become more politicized.

Genuine Scores for the top 3 Bond funds

  • PGIM Core Short-Term Bond Fund, 100
  • iShares Ultra Short-Term Bond ETF, 100
  • BlueOrchard Microfinance, 100

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All the best, Alister and the Genuine Impact Team

p.s. all Genuine Scores are accurate as of the 16th of April

Genuine Impact

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