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On June 4, the European Central Bank (ECB) announced significant changes to its €750 billion Pandemic Emergency Purchase Programme (PEPP), including an expansion of €600 billion and an extension until at least the end of June 2021. In my view, these moves, combined with the European Commission’s proposal for an EU recovery fund, leave euro-area equities poised to outperform US and UK equities over the next 12 months.
In particular, I have become more optimistic about German, French, Italian and Spanish equities. In macroeconomic terms, Germany looks set to outperform in the near and medium term. France has had a difficult crisis, but recent structural reforms should help its recovery. In Spain and especially Italy, I remain worried about high levels of debt and poor macro policy. But these are longer-term concerns, and French, Italian and Spanish equities have underperformed enough to warrant the same level of optimism as Germany.
My more positive view on euro-area equities is based on…
In late May, Japanese Prime Minister Shinzō Abe’s cabinet approved a second 2020 supplementary budget of ¥31.9 trillion (US$298 billion) to further combat the bruising economic impact of the COVID-19 crisis. This latest fiscal package provides financing help to struggling companies, subsidies to help firms pay rent, funds for health care assistance and support for local economies.
The headline ”business size” of the package — including assumed private-sector activity, loans from public financial institutions and actual new spending by the government — amounts to ¥117 trillion (US$1.1 trillion), matching the size of Japan’s first package delivered in April. All told, the nation’s fiscal policy response to the crisis thus far totals ¥234 trillion, roughly equal to 40% of its GDP.
The approval of the second package follows a May 22 joint statement issued by Haruhiko Kuroda, governor of the Bank of Japan (BOJ), and Tarō Asō, minister of finance, which read:
“The Government and the Bank are committed to making every effort to facilitate corporate financing and maintain stability in financial markets through the…
In our view, engagement with portfolio companies can enhance positive social and environmental impact and create lasting value for shareholders. We see material environmental, social, and governance (ESG) issues as strategic business issues that can affect a company’s financial performance, competitiveness, and sustainability. The better impact investors understand material ESG issues, the more informed their investment decisions.
We believe in taking a hands-on approach to engagement, meeting in person with boards and management teams, writing letters, or hosting calls multiple times each year. Further, we think productive engagements should aim for…
COVID-19-related disruptions have impacted operating performance in the higher education sector of the US municipal market. However, we remain constructive on the sector overall, supported by balance-sheet strength across select issuers.
Sector themes we are watching
Campus reopenings and student decisions will vary.
Campus reopenings will differ by state and the size of the institution. For example, California State University already decided to close all 23 campuses this fall, while smaller institutions such as Notre Dame and Boston College announced plans to reopen campuses.
Meanwhile, freshmen and returning students may weigh different options, such as taking online classes the first semester or staying closer to home — a benefit for public universities. Transferring to lower-cost or even “reach” schools could also be possible due to enrollment dislocations. Management teams say they are on track to meet…
Recent global liquidity injections, a low but improving global purchasing managers’ index (PMI), and a weaker US dollar are all contributing to a supportive backdrop for emerging market (EM) equities. To the extent that these trends persist in the period ahead, I believe EM stocks can continue posting attractive relative performance. Now may be a good time to look beyond China for EM equity opportunities.
Recovery paths matter
One encouraging sign is that more cyclical sectors and regions (e.g., travel and bank stocks; Latin America, ASEAN, and Russia) have rebounded along with broader EM equities over the past several weeks, as we have seen…