Amanda Breslin, CFA, CTP

What’s a T1 settlement got to do with it? When we talk about a T1 settlement, we’re really referring to the trade settlement for securities in the investment industry. The security cycle has shortened by a day, but what does that mean for you? When I started in this industry, we had a T+5 settlement date. This meant that if you sold something, you wouldn’t see that money for another 5 days, so you really had to plan ahead. Over the course of my career, I’ve seen the cycle slowly shorten, with the goal of improving market efficiency and reducing risk. Portfolio managers are excited about the shift, and I’m excited to share a bit more about why! Subscribe on YouTube for more videos like this one! https://lnkd.in/dwceikZq #personalfinance #moneytips #powerfulmoneyhabits #smartermoneyhabits #whatsblankgottodowithit #financialadvisor #wealthadvisor #investingininclusivity #t1settlement #marketchanges #tradeeasier #securitycycle

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BlackRock’s Secondaries & Liquidity Solutions team recently published their semiannual Secondaries Market Outlook 1H 2024. Increased adoption of secondaries by both LPs and GPs has led to 4x market growth over the last ten years, and we believe the market is well positioned for continued expansion.   In 2023, the continued search for liquidity resulted in the 2nd highest year of closed transaction volume on record at $115bn, and the 3rd straight year over $100bn. This volume is being accelerated by lower M&A and IPO activity causing sellers to look for alternative sources of liquidity. Buyers are also achieving meaningful discounts (avg. 85% of NAV in 2023) for high-quality assets. We are keeping our eyes on opportunities for investors and believe 2024 will be a big year for the secondaries markets. Another way that BlackRock is meeting our clients’ liquidity and performance needs. Well done, team! Read the full publication here: https://1blk.co/4bhUUXM #Secondaries #PrivateEquity

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The disinflation that characterized the second half of 2023 did not make it into the new year. For those hoping this was a temporary Q1 aberration, the first 20-days of PriceStats readings make sobering reading. April is generally a robust time of the year for price rises in most countries, but the gains so far this month are well above the norm; especially in the UK and Eurozone. This is energy and supply-side driven, but with #centralbanks claiming to be “data not date” dependent this news brings an unwelcome complication to the anticipated disinflation trend and the rate cuts that supported. #STTInsights

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One thing I value about Meradia is that I am always learning from my colleagues. This brief article by Ryan Bond, CFA, MBA, PMP reminding us about the value of collateral management is just another example of the expertise Meradia can bring to the table. #meradia

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Context matters. Corporate issuers downgraded below investment grade due to recessionary pressures tend to reclaim that status. Twelve of 15 issuers that became fallen angels during the GFC due to cyclical pressures have since returned to IG. Fallen angels downgraded in the mid-2010s due to commodity price pressures demonstrated a similar pattern. Six out of nine became rising stars, and only one defaulted. In all, 42 of the 72 issuers that became fallen angels for reasons largely outside their control returned to IG. In contrast, downgrades out of investment grade driven by actions that are at least partially within the issuers’ control have a much more lacklustre track record. Only 14 of these 39 fallen angels made it back to IG, and 8 defaulted. Free-to-air summary of the fates of more than 100 developed market fallen angels, from colleague Alex Bumazhny, CFA, at https://lnkd.in/dvXRc7kf. The full report (for subscribers) at https://lnkd.in/d-UnTBNS #fitchoncredit #fallenangels #crossovercredit #lbo #defaultrates #bondmarket

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The U.S. election poses defining choices to the electorate on many fronts, but we see less impact on the narrative surrounding the U.S. fiscal trajectory, however the election concludes. Our base case – regardless of who wins the elections – is that most of the 2017 tax cuts that are set to expire at end-2025 largely will be extended, signifying no meaningful increases in revenues. We don’t expect major spending adjustments under either candidate, given entrenched vested interests on entitlements and political difficulties in rolling back current legislation. Non-defence discretionary spending is only 15% of the budget, leaving little room for significant cuts. Debt-to-GDP is set to rise to 128% of GDP by 2028 under our current assumptions, though offsetting strengths mean the US rating still has more tolerance to absorb a rising debt to GDP ratio than other 'AA' category sovereigns. We’ve published a comment that puts this into a rating context. A free-to-air summary from colleagues Richard Francis, Shelly Shetty and Mark Brown is at https://lnkd.in/eWGQns_B, and the full report is available to subscribers at https://lnkd.in/eH3GRyRB. #fitchoncredit #usa #fiscalpolicy #debt #treasuries

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Our latest Stewardship Report is out! This year's report (link in comments) includes 30-odd case studies covering a selection of what we consider to be of most interest to our members, regulators, peers and others. Highlights from this year's Report: ✅ Escalation in members' best interests: how Railpen seeks to use all the tools in the stewardship toolkit to achieve our objectives on material ESG issues ✅ Working with industry to advocate for continued investor protections: this covers our (ongoing) work both with the Investor Coalition for Equal Votes (ICEV) but also with several hundred billion £ of scheme AUM on recent proposals to roll back important shareholder rights in the UK ✅ Integration beyond listed equity: Railpen is a significant private markets and infrastructure investor - and there are some great case studies highlighting how we continue to deepen our approach ✅ Greater accessibility: this is necessarily a lengthy report, but this year - as well as our usual glossary - the Design and Comms team has worked hard to improve navigation so that readers who aren't ESG experts can more easily cut through the jargon and move between relevant case studies and sections As always, this has also required significant contributions from colleagues beyond the Sustainable Ownership team. However, we welcome the additional opportunity for formal reflection and to produce a report we are proud of. We also find the stewardship reports we receive from our managers to be the most useful firm-level reporting produced: we read these cover to cover and they always provide us with helpful information as to what is (and isn't) being done on our members' behalf. My ongoing thanks to the Financial Reporting Council for creating and upholding a Code that gives investors the space to discuss their idiosyncrasies and what worked (or didn't work), and thereby produce insightful reporting. My bottom-of-the-heart thanks to colleagues from Design, Communications, Fundamental Equity, Public Markets, Internal Audit, Client Secretariat, HR, Compliance, the DE&I Committee as well as the Trustee and many more for their ongoing commitment, enthusiasm and support both for this report and the work which underpins it: this would, as always, not have been possible without you. Michael Marshall Adam Gillett Jessica J Cassey David Vyravipillai Sophie Harris Thomas Ward Shane McCullagh, CFA Jasmine Porter Megan Williamson Becks Goodman Colin Mitchell Paul O'Donnell Laura Faber Claire Morrell Philip Wood MCMI Jonathan Clark Johanna Venis MCIPS Caroline Hopper James Herbert Stuart Mackintosh Fenella Cuthbert Josh Sarson

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I recently interviewed American Securities Association CEO Chris Iacovella, who stepped back to look at the dramatic increase in financial regulations today and asked "cui bono?­" – “who benefits?” Chris fixed his gaze on the administrative state’s “derivative players – accountants, consultants, lawyers – who are advocating for more and more regulation.”   But Chris isn’t the only one asking the question.   Recently, SEC Commissioner – and former California state securities regulator – Mark Uyeda raised similar regulatory concerns regarding the administration of private funds. Mark argues that in justifying a package of reforms for private fund advisors, the SEC relied on provisions from 2010’s Dodd-Frank Act explicitly addressing brokers, dealers and investment advisors – while disregarding its provisions specific to private funds.   Commissioner Uyeda concludes: “Overreaching assertions of government jurisdiction is a problem for all market participants. … When contemplating the administrative state, a person should be concerned there if there is no practical limiting principle on the scope of an agency’s authority and the dangers associated with that method of governance.”   His remarks come at a time when federal agencies’ rulemakings within financial services are the target of challenges that they are overstepping their Congressional-granted authority – recent examples include the SEC’s Consolidated Audit Trail, its Treasury dealer rule and recently released climate disclosure rules, as well as the Department of Labor’s proposed Retirement Security Rule. As New York Times columnist David Brooks wrote more broadly about what he calls the growing bureaucratization of American life: “It’s not only that growing bureaucracies cost a lot of money; they also enervate American society. They redistribute power from workers to rule makers, and in so doing sap initiative, discretion, creativity and drive.”   While people might in good faith argue over the amount of regulation to promote a level financial playing field, I think most would agree that too much regulation and bureaucracy could do harm to all of us.

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Does it matter if the Fed is committing a policy error? The question that investors are struggling with is whether we are witnessing the Fed committing a policy error, and if we do, does it matter? First, there appears little doubt that the Fed’s hyper data-dependent policy framework is forcing it to excessively rely on flawed and backward-looking signals (from OER to cars and insurance prices, financial sector inflation to industrial age labor statistics), thus potentially setting itself up for a policy error. In addition, the infamous dots further amplify volatilities. This is one of the worst inventions from the Bernanke era. Dots are not co-ordinated with the rest of the Fed policy apparatus and represent nothing more than personal views of governors, some voting and some not. However, dots have become so intertwined into the market that getting rid of them might cause even greater volatility than dots themselves generate. This feels like a less than efficient decision-making and communications framework. However, are investors right to discount these negatives? Surprisingly, the answer is, yes. Why? Even if the Fed commits a policy error, it can unwind it in seconds. First, we live in a world of abundance not shortage of capital. The cloud of finance has grown over the last three-to-four decades from less than 2x to anywhere between 5x and 10x GDP, depending on how one values derivatives and off- balance sheet commitments. Pricing signals do not function well in a world of abundance. While making it harder to tighten, this surplus capital cushions the real economy, explaining why spreads are falling (even as the Fed tightens) as surplus capital feverishly circulates looking for new, though diminishing, opportunities. Second, another reason why spreads are falling (even for commercial real estate and CCC debt) is that the Fed is now rolling out dedicated rescue policies at a warp speed (usually over the weekend). Hence, why should spread widen, when in due course, there probably will be dedicated policies for commercial real estate, private capital or anything else that might be systemic (a la SVB or repos). Do we pay a price for such deep penetration of the markets? Yes, risks never go away, they just migrate – from stable markets to volatile neutral rates, unpredictable style rotations, social polarization, unorthodox electoral outcomes, campuses on fire and geopolitics. But deflating asset bubbles or deleveraging are not on the menu. Views expressed are my own and do not reflect views of my employer.

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Even as shareholders, we’ve opined on Novo before. https://lnkd.in/gCRZp86n   Why on earth should a non US company, who spent non US dollars to develop a pharma regimen that has been found to have so many knock on positive affects that its global demand far out strips two of the world’s largest drug companies to satisfy demand, likely for the next few years, cut their pricing at the behest of the US Congress?!?! (Especially after recently spending $11 billion dollars to acquire enough manufacturing capacity to meet demand. )   Sure it’s headline grabbing, but how long were elected officials beholden to lobbyists interests before they finally allowed price negation for Medicare?   Medicare price negotiations and profits here where US companies charge more for their drugs here than overseas! https://lnkd.in/gwBdGm8a   Prices will come down As Lilly and other competitors establish themselves. If you want to know more about Europe’s, currently, most valuable company, go here, https://lnkd.in/gbNwGYwV   When you land on the page, you’ll receive a familiar cookie acceptance screen. But, because it is a European site, you’ll be able to opt out of all tracking and still enter the site because of EU internet privacy laws. This is the type of stuff Bernie and his pals should be instituting. Not going after Novo who’s made ~$12 billion the last 12 months really helping people live longer healthier lives, (and dropping the price to their citizens at nearly nothing, imagine that!) but META who’s made nearly $50 billion all while doing much more with all our personal information that Congress accuses TikTok of! #medicarechanges #medicaid #bigpharma #prescriptiondrugs #prescriptions #healthcarecosts #healthinsurance #drugprices #drugmanufacturing #healthinsuranceforall #insurancecoverage #aarp #merck #pfizer #drugdevelopment #drugs #lilly #abbvie #regeneron #medicare #nyt #pharmaceuticalmarketing #prescriptiondrugs #novonordisk #weightloss #obesity #medicare #drugpricing #daniblum

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The downgrade reflects Kohl's continued EBITDA declines. The declines signal that the company may not be able to successfully execute an operating strategy to profitably defend market share in the secularly challenged department store space. Fitch views flattish revenue and EBITDA in the medium term as Kohl's best-case scenario. The company's recently reduced 2024 guidance suggests a rebased EBITDA of around $1 billion, below the $1.2 billion in Fitch's prior forecast.

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Since iHeartMedia’s last earnings call in February 2024, we’ve received numerous questions about iHeart’s ability to move assets to Unrestricted Subsidiaries. In March 2024, Covenant Review published two reports on the Company’s ability to move value to Unrestricted Subsidiaries under its various high yield indentures. Since publishing these reports, we have received additional follow-up questions on the Company’s ability to engage in potential liability management exercises. Today, Covenant Review published a report where we answer the most frequently asked follow-up questions that we’ve received on potential liability management exercises under both the Credit Agreement and the bond indentures. Those with access to our high yield and leveraged loans research can read the full report at www.covenantreview.com. #highyieldbonds #leveragedloans #levfin #covenantreview #fitchsolutions #finance #CreditSights

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With all the talk in the news about potential rate cuts – or a lack thereof – I wanted to share some recent commentary from Michael Plage and Ford O’Neil, two Fidelity fixed income portfolio managers, about their thoughts on fixed income for the rest of 2024. Want to learn more about Fidelity’s fixed income capabilities? Check out this link: https://bit.ly/3JGeIIL

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Many of the advisors I work with are focused on what might be next for the Fed. Our May Advisor Outlook looks at how markets have repriced meaningfully since the start of the year, and discusses how advisors might want to position portfolios differently whether they expect the Fed to hold, cut, or hike rates in 2024. Many investors across BlackRock expect that the Fed will hold rates through September as a base case, which may benefit short & intermediate-term bonds, higher-yielding “plus” fixed income sectors, quality stocks and alternative strategies. Check out the full outlook to explore insights for how you can align your portfolios with the current market conditions: https://lnkd.in/edQt5HpS. For Professional Investors Only

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Treasury yields rose marginally across the curve this week. This past week’s economic data wasn’t as significant as the prior weeks, but still supported Treasuries.  Retail Sales came in lower than expected, and Initial Weekly Claims data showed a moderating consumer and Labor Market. The Treasury auctions went well, and a flight to quality bid was still present with the ongoing issues with the French elections. However, Friday’s stronger than expected S&P Flash PMI sent Treasury yields to the highs of the week. The S&P report continues to show growth in economic activity and Existing Homes Sales also showed some resiliency. While these are only two data points, they do counter the more recent narrative that manufacturing activity is slowing and that the consumer can’t buy a home. Fed Fund Futures now have a 65% probability of a Fed rate cut in September, and roughly a 75% probability of two rate cuts by December 2024. The market pricing in two rate cuts vs the Fed’s projections of only one rate cut this year isn’t too concerning. However, at the June FOMC press conference, Jerome Powell indicated that the Fed isn’t in a rush to cut interest rates. The market may be a bit too complacent in regard to FOMC rate actions and the associated volatility with those decisions. Technically, yields look to be basing with the Ten-Year Treasury Yield trading in a range of 4.22% to 4.30%. Bond volatility measures are also basing. In the past, low Volatility measures and lower yields have led to a move higher in yields. If you are aggressive in your positioning, you may want to short Ten-Year Treasuries. For the rest of us, T-Bill and Chill is a good strategy over the summer. Enjoy with a cold beverage of your choice.

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The TCW Group’s #EmergingMarkets Update is now available. Read why Distressed Leads the Way, as we continue to monitor hard landing narratives, the Israel/Hamas conflict, Chinese growth downside, election risk & more.

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The Fed continues to get more concerned over the Banking Industry's liquidity and interest rate risk management. Bankers know that borrowers who proactively manage their businesses almost never end up in Special Assets so Banks need to be proactive in managing their business as well. Summit can help provide liquidity by buying distressed C&I, CRE and Equipment deals. We also recently launched a new platform to buy performing multi-family deals. Selling non-performing loans improves your net interest margin!

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