This analysis is by Bloomberg Intelligence Senior Industry Analyst Alison Williams and Bloomberg Intelligence Industry Analyst Neil Sipes. It appeared first on the Bloomberg Terminal.
Equity and bond price gains in 1Q build on a better 4Q and could help steady asset and wealth managers’ revenue outlook, though a pullback in recent weeks bears watching. Comparisons are still tough vs. higher asset values in the year-ago period. Better prices could aid investment-bank pipeline execution, though a resurgence in volatility may pose risk.
Asia, Europe drive institutional sentiment bump
Institutional investors’ risk appetite modestly improved in February, based on State Street’s Investor Confidence Index. Asian and European sentiment improved, while North America sentiment was relatively stable. Europe remains the most bullish after a December jump.
BlackRock, Invesco, T. Rowe Price and Franklin Resources are among the largest global asset managers, along with DWS Group, which is majority-owned by Deutsche Bank, and units of JPMorgan, Goldman Sachs, Morgan Stanley and UBS. Investor sentiment and asset allocations have broad industry implications.
Stock prices support manager, bank revenue
Equities markets are generally higher in 1Q, though some give back of gains in recent weeks bears watching for asset managers and global investment banks. Higher prices are typically positive for issuance and trading, as well as asset and wealth management — with direct effects on portfolio values and fees and potentially influencing flows. Global stocks have risen 5.7% in 1Q so far, as measured by the MSCI ACWI, following a 19.8% drop in 2022. The S&P 500, Nasdaq and Dow Jones Industrial Average in the US, as well as the European Stoxx 600, have risen 1-12%, while the Nikkei is up 7%, China’s Shenzhen Composite 9% and the Hang Seng 4%. The MSCI emerging-market index has increased 3%.
Global prices in 1Q to-date are averaging 7% above 4Q, based on the MSCI ACWI, 10% below a year ago.
US, global high yields increase in recent weeks
Narrowing credit spreads and lower yields can be positive for managers of fixed-income assets, as higher prices aid asset values and fees. Volatility may threaten fund flows. Bank trading and underwriting usually benefit from lower yields, though spreads that are too tight can limit trading profit. Yields and spreads are higher in recent weeks, and US and global investment-grade corporate yields are up 8-9 bps in 1Q to-date, while those for high yield are still 41-43 bps lower. US and global investment-grade corporate spreads are 10-15 bps tighter, as those for US and global high-yield have declined 72-76 bps, based on Bloomberg indexes.
The Bloomberg Global Aggregate Corporate Index is up 1% in 1Q, after a 16.1% decline in 2022.
Bloomberg
Source link