Nurtured by ever-cheaper computing power and the datafication of modern life, the rate of advancement in technologies based on artificial intelligence (AI) and offshoots like machine learning has a
Despite a downturn in May, the second quarter as a whole was a positive one for investment markets: global equities generally rose, credit spreads remained tight and implied equity volatility (as measured by the CBOE Volatility Index) was well below average. Interest rates remained extremely low both in the United States and abroad—particularly in Europe, where some $13 trillion of bonds are trading at negative yields.1 In addition to equities and bonds, currencies also experienced unusually subdued levels of volatility
Primary issuance picked up in the high yield market; proceeds were used largely for refinancing, which is a sign of health, and issuance quality remained surprisingly high for this late point in the credit cycle. Leveraged loan issuers were on a different course, however, and the leverage on new loans reached an all-time high.
It’s by design that companies in Matthew McLennan’s portfolios aren’t exactly those that set investors’ hearts racing with excitement. “We’re happy to own businesses with what we consider a gradual positive drift to them,” he says. In this article, Matthew McLennan and Kimball Brooker describe how they assess “fade risk” in a number of industries, what makes them uneasy about the state of the world today, why their exposure to gold is higher than normal, and why they see mispriced value in Fanuc, Orkla, Schlumberger, Jardine Matheson and Weyerhaeuser.
The timing and conditions of Brexit remain unclear, but most estimates suggest that both the UK and EU economies will suffer as frictions are introduced into their economic connection.