A new report from the White House Council of Economic Advisors focuses on the challenges to the US Economy due to climate change and the likelihood that the federal government will be required to dramatically modify its spending priorities to avoid amplifying the problem going forward.
The odds of a soft landing for the US economy narrowed significantly in Q1 as economic data continued to come in too hot and markets began to fear an environment of higher rates for longer.
We are writing to give you a brief update on the events in the banking sector over the past week and the implications on Rain portfolios. By now you are likely aware of the events surrounding Silicon Valley Bank (SVB) which was seized by the FDIC on Friday, and Silvergate Capital Corp, which announced it was voluntarily liquidating its banking entity. Both firms were hit by downturns in their respective industries, technology, and cryptocurrency startups.
The economy and financial markets remained rangebound in the fourth quarter, after a year of historic shocks including surging inflation, the outbreak of war in Europe and sharply tighter monetary policy.
The economy decelerated and financial conditions tightened during the third quarter, making for a challenging time for financial markets. While inflation numbers appear to have peaked during the period, the outlook for prices remains uncertain, driven by the continued war in Ukraine, draconian Chinese COVID policy, and a tight US labor market.
Impact investing got a shot in the arm this quarter with the passage of the Inflation Reduction Act on August 16.
While the war in Europe dominated markets in Q1, the only war that mattered to markets in Q2 was the battle that was heating up between the Fed and inflation. During the quarter, surging prices forced the Fed to pivot to dramatically more aggressive tightening. This in turn drove mortgage rates up, sent the dollar soaring and led to significant stock market losses.
Grantham makes the argument that the process of moving away from fossil fuels will itself be resource intensive and that the commodities needed are limited in supply.
Just as the prolonged economic disruption of COVID-19 seemed to be disappearing in the rearview mirror, the world got a lot more complicated again in the first quarter of the year.
President Biden has nominated Sarah Bloom Raskin to be the Federal Reserve’s next vice chair for bank supervision, the most powerful banking regulatory role in the country.
Despite uneven growth and the start-stop nature of the COVID economy in 2021, the US (and most developed economies) registered the strongest economic growth in nearly four decades.
After years of pressure from activist groups, Harvard University, with the largest education endowment in the US totaling $42 billion, announced it would no longer make any direct investments in companies that explore or develop fossil fuels.
Toward the end of the third quarter of 2021, it became clear the economic rebound in the US would be more uneven than expected. A resurgent virus and signs of waning vaccine effectiveness held back the nascent recovery in the travel and leisure industries, supply-chain bottlenecks persisted and began to hamper production, a regulatory crackdown in China sent shudders through foreign markets, and back-to-back hurricanes in the eastern US further complicated the recovery.
The US economy surged through the second quarter on the back of massive fiscal stimulus and public health data indicating that the worst of the pandemic is behind us.
In what some are calling the vote heard around the world, a small activist investor successfully voted out three of Exxon Mobil’s 12 board directors for failing to push the company hard enough on climate transition issues.
After a difficult 2020 and a sluggish start to 2021, we are finally able to envision a return to economic normalcy. As the year progresses, both a fiscal surge and the ongoing vaccine rollout will likely dominate the economic outlook. Fiscal support in the form of the $1.9 trillion American Rescue Plan is expected to provide $1.2 trillion (or roughly 5% of GDP) of additional spending to the economy over the course of just six short months and much of this is targeted toward lower-income households that are more likely to spend it.
Shortly after rejoining the Paris Agreement via executive action earlier this year, President Biden announced a $2 trillion infrastructure plan.
The US will spend the better part of 2021 and beyond recovering from the pandemic that has left deep scars on the economy and labor markets. The good news in this story is that the vaccine came sooner and is more effective than expected. Furthermore, single-party alignment in Congress increases the chances of continued fiscal stimulus for the economy.
The recovery that took hold in May and June, bolstered by the $2.2 trillion CARES act and aggressive action by the Federal Reserve, began slowing over the summer and more dramatically into the Fall.
A new initiative by The “Big Four” accounting firms – Price Waterhouse, KPMG, Ernst & Young, and Deloitte – seeks to identify a set of universal ESG metrics that can be reflected in mainstream annual reports and other corporate financial disclosures.
In late June, the Department of Labor (DOL) proposed a rule that would require retirement plan fiduciaries to prove that they are not sacrificing financial returns or increasing risk if they put money into Environmental, Social, Governance (ESG)-related investments. The move comes at a time when investor interest in the space is surging in reaction to wildfires in Australia, the Covid-19 pandemic, a heightened awareness of racial inequity and social justice issues, and an economic downturn that has disrupted labor markets and global supply chains.
The second quarter saw broad financial markets rebound strongly, erasing nearly all losses experienced during the March meltdown. Markets were buoyant on the back of unprecedented fiscal and monetary support from policy makers around the world as well as early signs that COVID infection rates appear to be levelling off and may be past peak in some countries.
The economy has been receiving palliative care since it was forced to take a back seat to the medical crisis that is still unfolding around the world. A flattening infection curve in many places and talk of “reopening” the economy have lifted markets from March lows, in a bounce almost as violent as the initial selloff itself. But it is far too early to assess the economic damage caused by efforts to contain the spread of Coronavirus.
The world of impact investing just got a lot more interesting as Blackrock, the largest money manager in the world with nearly $7 trillion under management, committed to the space in a big way. The company’s chairman Larry Fink said last week that he believes “we are on the edge of a fundamental reshaping of finance” due to climate-change-related issues and committed the firm to making sustainability the new standard in its investment offerings.
The Federal Reserve charged to the rescue in a big way in 2019. In the face of increasing trade tensions and recessionary forces bearing down on the economy, US central bankers reversed course and reduced short-term rates three times starting in late July and in October, took steps to increase liquidity in short-term lending markets. By December, investors began embracing the idea that the worst of the US-China trade war was behind us.
The insurance industry isn’t usually who we turn to for solutions to humanity’s most pressing issues. However, far downstream from the vanguard of individuals who have been investing in companies that are making positive changes to their environmental, social and governance footprint in the world (and, likewise, divesting from bad actors), is a movement among insurers who themselves face an existential threat from climate change.
For a number of reasons, not all companies at the top of Environmental, Social and Governance (ESG) rankings are affecting as much positive impact in the world as one might expect, nor are all bottom-line focused companies bad actors with regards to their environmental, social or governance behaviors.
Equity and bond markets can’t agree on one basic question this year: is the economy headed toward recession or not? US equities, which were up more than 20% through the end of Q3, seem to be brushing off signals that the economy may be slowing while bonds, up more than 8% (corporate bonds more than twice that) through the same period – far better than their stellar performance during the 2008 credit crisis – seem to be pricing in a sharp recession.
Divestment has been a long-standing approach to influencing companies to be more socially and environmentally responsible.
For the past forty years or so, CEOs in America have said they had a fiduciary duty to shareholders to maximize profits.
The current economic expansion entered its 11th year in July (the longest in recorded history) and there are currently enough early warning indicators of recession to justify a quick look at what that means for markets and your portfolio. What is a recession and why do they happen?
After the brutal flogging the market took late last year, few expected such a strong start to 2019, with world equity returns registering one of the best first halves in more than 20 years. Also notable, however, was the backdrop of deteriorating economic growth and softening earnings data during the period.
Research has demonstrated the value of gender diversity in corporate leadership roles, namely as it relates to improved financial performance. Even though women comprise fifty percent of the global working-age population and have educational attainment comparable to men, they have significantly lower labor market participation rates than men.
As we discussed in our last letter, the sudden plunge in equity markets in Q4 seemed to be at odds with the solid economic fundamentals in the US at the time. Since then, the soft patch in data we witnessed in January and February – data that seemed to confirm the recessionista’s worst fears - has turned out to be a passing phenomenon, largely attributable to severe winter weather and the prolonged government shutdown. The soft data have been replaced by robust economic numbers in retail sales, employment, industrial production, and wage growth, while inflation remains tame.
When the market plunges, investors immediately begin searching for a new narrative to replace the old one. In Q4, the narrative of solid economic growth and earnings, low inflation, a robust job market and improving wages quickly gave way to one of too much Fed tightening, slowing global growth, escalating trade frictions with China, a strong dollar, stretched valuations and an impending recession. All off this in the course of less than one week. This sudden change in storyline belies the fact that large, open economies – unlike financial markets - simply don’t roll over that quickly.
•Volatility in early October is more likely the result of high valuations and tightening financial conditions, not necessarily a flattening yield curve •Trade tensions with China are compounding valuation anxiety
The spat between the US and Turkey is currently roiling various markets, with the greatest impact being felt by other emerging market economies. While there are fundamental reasons to be
If you’re wondering what is driving markets right now you’re not alone. 2018 has been characterized by a lot of noise and the pace of today’s news cycle makes it seemingly impossible for markets to fully digest current events before new ones crowd out yesterday’s news.
For most of the history of impact investing, equities have dominated the conversation. There simply hasn’t been enough of a bond market driven by environmental, social and governance (ESG) factors
One serious issue that has plagued investing using environmental, social and governance (ESG) inputs is the lack of quality data and measurement tools. Investors naturally want sustainability performance data that
While it’s not fair to say that this is where it all began, it is hard to find a piece of research or marketing that doesn’t reference the UN’s Sustainable
A comprehensive review of more than 200 academic studies, industry reports and books on the subject of environmental, social and governance factors in investing shows specifically how corporate sustainability practices
AQR is generally known as a hard-nosed investment management firm largely focused on quantitative analysis and is best known as an early adopter of factor investing. So, it was a
Authors Whelan and Find dispel the notion that integrating environmental, social, and governance (ESG) issues into corporate business strategy costs more than it’s worth. Citing data and numerous case studies,
See also “Fiduciary Duty in the 21st Century” UNPRI Report. The CFA Institute has joined a growing chorus of voices calling for environmental, social and governance (ESG) issues to be
As the data tells us today, interest rate risk has bled across asset classes in a way that resembles how credit began to dominate asset prices in 2007. The biggest