While equity markets are feeling the pinch from rising real rates, earnings reports and guidance are yet to reflect the effects of the encroaching recession. This leaves markets vulnerable to a downside correction once the message sinks in. 

It is all hands on deck to deal with the current energy crisis, even if that forces countries to use more polluting fossil fuels to meet energy needs especially in the coming winter. However, that does not mean the transition to renewable resources should end up on the backburner. Instead, there is a clear case for accelerating the move to solar, wind and other sources of clean energy. 

Senior secured corporate loans are debt instruments similar to high-yield bonds in that they are rated below investment-grade (Ba1/BB+). They differ from high-yield in that they are senior secured instruments, secured by all assets on a company’s balance sheet. In addition, as floating rate instruments, global loans are relatively immune to the adverse impact of rising interest rates.   

The summer has seen a sharp deterioration in prospects for the the euro area economy. The cost of living crisis is hitting consumers’ pockets hard. Europe’s manufacturing sector is contracting while momentum in the services sector is slowing. To make matters worse, wholesale energy prices have soared to all-time highs in Europe as Russia throttles gas supplies. 

As a broad asset class underlying the full spectrum of economic activity and a non-cyclical slant, infrastructure debt has attributes that stand out for investors. One key point is that many of the services financed with these bonds are indexed, protecting cash flows from rising inflation. Also, the debt typically has floating rate coupons that are adjusted when interest rates rise. 

Base effects, lower (or less high) energy and raw materials prices and a broad economic slowdown later in the year may see eurozone inflation stabilise or retreat towards the end of 2023. However, for now, an inflation-busting ECB will likely keep its foot on the monetary policy brake and could soon even raise policy rates by a chunky 75bp rather than the more widely expected 50bp. 

Senior investment specialist for global equities Ramon Esteruelas briefs chief market strategist Daniel Morris on four books he has read on climate change. The books discuss the relevance of climate change science and the reliability of projections, the availability of adaptive and mitigating solutions and breakthroughs, the long road to net zero, and the need for a rethink on growth.  

Until recently, humanity has relied on chemical solutions to address its biggest challenges. For example, our ability to grow food, to defend livestock against disease and to safeguard human health, all depend in part on chemical solutions. Today is no different. Yet resistance to chemicals is rising rapidly, exacerbated by climate change and ecosystem degradation.  In the second of this series, Ulrik Fugmann and Edward Lees, co-heads of our Environmental Strategies Group, talk to Andrey Zarur, CEO and co-founder of GreenLight Biosciences, about how his company is using RNA technology to create a new generation of chemical free pest control methods. They consider the benefits of such innovations including enhanced food and biodiversity security, as well as the growing role investors can play in this area. The uncapped impact series brings you up close and personal with our Environmental Strategies Group and businesses that, regardless of their size, are making a big impact. 

While day-to-day ‘market noise’ may feature big in many investors’ minds, it is worth mining long-term structural trends as well for opportunities. Cloud computing is one such trend, offering many advantages to both public and private sector users of its services and to investors looking for a billion-dollar industry where growth is still in the early stages. 

Listen to this Talking heads podcast with Christophe Montcerisier (https://investors-corner.bnpparibas-am.com/author/christophe-montcerisier/), head of real estate debt, and chief market strategist Daniel Morris. They discuss the absence of a direct and immediate link between higher interest rates and the performance of real estate debt and the defensive characteristics of the asset class. Among other things, its solidity derives from some of the pandemic-induced structural changes, including a shift in office use and greater demand for suburban properties.