Are governments and central banks trying to cure a debt problem with more debt? As policy intervention drives markets higher at the same time as economic data nosedives, Ariel Bezalel and Harry Richards discuss where they are finding opportunities and avoiding pitfalls in today’s bond markets.

Technology stocks largely led the market before the coronavirus pandemic took hold and while the virus has turned much of the world on its head, technology stocks continue to power on. With many workers at home for the foreseeable future and friends and family socialising from a distance, will the technology sector continue to dominate? Jupiter’s investment team discuss this question and explore the regions, sub-sectors, and stocks to watch.

The Covid-19 virus continues to whistle its way through developing markets at lightning speed, as well as more than thirty of the mainly southern and south-western states in the US seeing an upsurge (daily new cases in the US have reached 63,000; in context that is 13,000 more per day than a week ago). When Coronavirus first broke out, there was a widely held belief that, like the flu virus, Covid-19 might be naturally suppressed by heat and sunlight (a contributing factor to flu outbreaks being rare in summertime). The fact that Covid-19 is now going through hot regions, both temperate and arid, like a dose of salts, either debunks the thesis, or at least demonstrates that other more powerful epidemiological forces are at work.

In this edition of Active Minds, James Clunie discusses the two themes that seem to be driving markets today: companies well positioned to endure lockdowns, and those with most to gain from lockdowns easing. Interestingly, both kinds of stock are outperforming. Meanwhile, Matthew Pigott looks at Brazil’s experience with Covid-19, and why its market could go from euphoria to hysteria and back again. Lastly, Mitesh Patel talks about the Japanese market and how investors’ narrow focus is creating valuation opportunities elsewhere.

This week has been one of targeted fiscal heavy lifting, particularly in the European Union. One of the ironies of the current impasse between the EU and the UK in concluding a free trade agreement is the EU’s insistence that its strict rules on state aid provision must be adhered to by the UK so as not to give British companies a competitive advantage (or, more accurately, not to put EU companies at a disadvantage). Announced a while ago, Italy’s flag-carrying airline Alitalia has already been bailed out, as has KLM-Air France by both the Dutch and French governments.

Harry Richards, Fund Manager, explains why investment grade offers abundant opportunities in a credit picker’s market.

In this edition of Active Minds, Matthew Morgan looks at the tug of war between aggressive policy action and optimistic sentiment, and the prevailing uncertain risks of the pandemic’s continued economic and societal impact. Elsewhere, Alastair Gunn looks at the factors underpinning equity markets and whether M&A can make a comeback, Avinash Vazirani looks at India’s experience navigating the Covid-19 crisis so far, while George Fox looks at Japan’s role as a source of income in these tough markets.

Ariel Bezalel, Head of Strategy, and Harry Richards, Fund Manager, Fixed Income, explain where they have been snapping up credit opportunities, while remaining alert to the risks often concealed in bear market rallies.

Dividends have gone into lockdown. As the world attempts to control the spread of coronavirus, companies are slashing or foregoing their dividends globally in an effort to shore up their capital. In Europe, the European Central Bank (ECB) has taken it a step further, ordering banks to pause all dividends and share buybacks, and there is a real possibility other central banks may follow suit. 

The political ground is shifting among the western democracies: the emphasis is no longer merely on containment and conquest of Covid-19, it’s how and when to unshackle economies and get people back to work again. The political imperative is most immediate for President Trump, now only seven months away from his date with the electorate and the ballot box.

Our scepticism and our underweight exposure to US, UK and EU banks have kept the Jupiter Global Financials strategy safe from the bulk of the unfortunate deluge of dividend cancellations and profit warnings that COVID-19 has induced. Where we do have exposure, it is focused on banks and insurance companies with quality management teams in developed countries such as Switzerland or the US, such as the Swiss regional lender Banque Cantonale Vaudoise.

Dividends have gone into lockdown. As the world attempts to control the spread of coronavirus, companies are slashing or foregoing their dividends globally in an effort to shore up their capital. In Europe, the European Central Bank (ECB) has taken it a step further, ordering banks to pause all dividends and share buybacks, and there is a real possibility other central banks may follow suit.

Barely a day goes by around the world without another lock-down, border closure, confinement order or congregation curtailment as countries look after their own domestic interests first, anybody else’s second. National portcullises are down, drawbridges up, gates firmly shut. Central bank policy statements and national treasury crisis responses to help support markets, businesses and livelihoods are ten-a-penny and on shifting sands; interest rates evaporate, the stimulus and life-boat sums are telephone numbers long.

Markets slumped in the last week of February, but the Growth vs Value valuation spread actually widened further, explained James Clunie, Head of Strategy, Absolute Return. In the history of Growth vs Value spreads, we’re now in the 100th percentile, so it’s very extreme! Even when you’re in the 100th percentile, it can of course get even worse, and that’s what has happened.