Although the twin headwinds of economic and geopolitical uncertainty are buffeting international markets, stocks in developed international markets invite closer examination. Historically low interest rates, supportive central bank policy, relatively attractive valuation and the chance for returns to experience mean reversion — or a move back toward average — may frame an opportunity for international developed market equities to outpace the S&P 500 Index.Read More
One of the trends affecting real estate markets this year is the increasing difficulty commercial real estate companies are facing as they seek to complete potential acquisitions. Strengthening commercial real estate fundamentals, coupled with the low cost of financing, have resulted in a large increase in the number of bidders for assets in the past several quarters. In some cases, public real estate companies must compete against other buyers that may have a lower cost of capital. This trend has been most pronounced in the US and other developed countries.Read More
The European Central Bank’s (ECB) surprise rate cuts on Thursday — reducing its main lending and deposit rates by 10 basis points — show that its policies so far have been inadequate to solve the euro-area’s economic malaise. Economic growth has stalled, and deflation remains a threat in the eurozone. The rate cuts may help to weaken the euro further in the currency markets, but nobody should be under any illusion that banks will start lending or expanding their deposits as a result of the rate cuts alone, or that these cuts will trigger a wider economic recovery.Read More
On Sept. 4, it became clear to investors that the US Federal Reserve and the European Central Bank (ECB) are going different directions. At its meeting that day, the ECB cut its deposit rate by 10 basis points (bps) to reach a level of -20 bps, and reduced its main refinance rate by 10 bps to reach a level of 5 bps in an attempt to bolster growth and stop disinflation in the eurozone. More importantly, the ECB indicated it would start buying asset-backed securities covering the real economy and including real estate. Through these moves, the ECB is poised to expand its balance sheet dramatically and inject material liquidity into the eurozone economy.Read More
Net, net, European Central Bank (ECB) announcements surprised positively across the board:
- Rate cuts were a positive surprise.
- Without much detail at this point, the ECB also appears to be planning to increase its balance sheet substantially, largely through bond purchase programs announced today.
While many global small- cap companies have gotten their balance sheets in good shape over the last few years, valuations are currently a concern. The MSCI World Index is up 184% since the market low on March 9, 2009,1 and we believe most equities are at or near full value. This makes it much harder to find high-quality companies at cheap prices. Against this backdrop, the challenge is to find the hidden gems within the vast universe of global small-cap companies.Read More