The material contained on Artisan Canvas represents the views and opinions of the authors. Material written by any particular individual may or may not reflect the views and opinions of Artisan Partners or its associates. The material contained on this site may contain forward-looking statements regarding future events and future performance, as well as management’s current expectations, beliefs, plans, estimates, or projections. Forward-looking statements regarding Artisan Partners Asset Management Inc. and its subsidiaries are subject to a number of risks and uncertainties, including those factors described within “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on February 18, 2020, as such factors may be updated from time to time. The views and opinions expressed in this material are based on market conditions as of the date indicated and are subject to change without notice. While this information is believed to be reliable, there is no guarantee to the accuracy or completeness of any statement in the discussion.
This website does not constitute an offer or recommendation by Artisan Partners of securities or services to, or a solicitation by Artisan Partners of an offer of services or to buy, sell or hold securities. Artisan Partners and the authors noted herein may have financial interests, through investment vehicles or personal investments, in any themes, trends, companies or securities discussed. Materials on this website are informational only and should not be taken as investment recommendation or advice of any kind whatsoever (whether impartial or otherwise). Investing is subject to risks, which include the potential for fluctuations in investment value and loss of principal. Past performance is not indicative of future results.
MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. This report is not approved or produced by MSCI. Frank Russell Company ("Russell") is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and/or Russell ratings or underlying data and no party may rely on any Russell Indexes and/or Russell ratings and/or underlying data contained in this communication. No further distribution of Russell Data is permitted without Russell's express written consent. Russell does not promote, sponsor or endorse the content of this communication. The herein referenced S&P index(es) ("Index") is a product of S&P Dow Jones Indices LLC ("S&P DJI") and/or its affiliates and has been licensed for use. Copyright © 2021 S&P Dow Jones Indices LLC, a division of S&P Global, Inc. All rights reserved. Redistribution or reproduction in whole or in part is prohibited without written permission of S&P Dow Jones Indices LLC. S&P® is a registered trademark of S&P Global and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"). None of S&P DJI, Dow Jones, their affiliates or third party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and none shall have any liability for any errors, omissions, or interruptions of any index or the data included therein. Source ICE Data Indices, LLC, used with permission. ICE Data Indices, LLC permits use of the ICE BofAML indices and related data on an "as is" basis, makes no warranties regarding same, does not guarantee the suitability, quality, accuracy, timeliness and/or completeness of the ICE BofAML indices or any data included in, related to, or derived therefrom, assumes no liability in connection with the use of the foregoing, and does not sponsor, endorse, or recommend Artisan Partners or any of its products or services.
© 2021 Artisan Partners. All rights reserved.
Will Dividends Experience a V-Shaped Recovery?
While not as dramatic as during the global financial crisis, dividends in 2020 have taken a hit: Dividends globally declined some $108 billion to $382 billion in Q2—a 22% YoY drop. An estimated 27% of companies globally cut their dividends, including more than half of European companies. In the UK, 176 companies canceled dividends altogether. The story is slightly different in the US:
Is Infrastructure Spending the Super-Highway to Recovery?
As governments globally seek fresh means of stemming the economic devastation wrought by COVID-19 and its attendant lockdowns, a common consideration is infrastructure spending—hardly surprising, considering governments have historically turned to infrastructure as a means of creating jobs and, ideally in turn, goosing consumption (see: Alphabet Soup, FDR). Considering it’s a public good which can often go begging when the economic outlook is rosier, infrastructure seems a natural candidate amid a period of flagging aggregate demand. And indeed, 2020 has seen its share of planned infrastructure spending globally.
Value Versus YOLO
The pandemic has accelerated secular trends—such as the shifts to e-commerce and digital payments, social media’s dominance of advertising spend and the rise of gaming. It’s also intensifying normal cyclical fluctuations, pulling forward home improvement projects and pressuring retailers—particularly those reliant on shopping mall locations—to declare bankruptcy. None of this is terribly surprising. More likely to catch market participants’ eyes, the combination of COVID-19 and social media is amplifying the oldest cyclical phenomenon known to mankind: greed!
Supply/Demand: The Commodities Recovery
Supply/Demand is a semi-regular feature of the Artisan Canvas rounding up interesting and quirky subjects from across the Internet with a focus on economic and business trends. A good rule of thumb among the Artisan Canvas editorial staff is “never reason from a price change.” With that in mind, we present Supply/Demand.
Broadly speaking, commodities prices have risen considerably since early March’s sharp downturn. Is this portending an economic recovery as demand picks up? Or are we facing down sustained supply chain disruptions?
Market Rally Met With Narrowing Leadership
Active, bottom-up oriented investors can be caught flat-footed by unforeseen bouts of volatility—indeed, 2020 has already seen several unprecedented selloffs and remarkable recoveries. However, a bottom-up approach needn’t preclude using tools to help identify and, to the extent possible, mitigate the portfolio risks associated with meaningful market reversals. Admittedly, market unwinds will likely never be entirely foreseeable. But we believe it is possible to anticipate periods where the risk of a market reversal is high—and as active managers, to then reevaluate the risk-return tradeoff for portfolio holdings with material unwind risk.
Europe’s Ongoing Evolution
Relative to the US, Europe’s stock markets have a reputation of being staid, dominated by “old economy” industries and national champions. But Europe may no longer deserve this reputation. Since the global financial crisis (GFC), the makeup of Europe’s equity market has undergone a gradual but meaningful evolution.
Housing: How Fed Policy Is Aiding the Real Economy
Amid a world of economic headwinds, the US housing market has been a bright spot—delivering a V-shaped recovery since April’s plunge and possibly offering some insight into the efficacy of the Fed’s activities year to date, as well as broader consumer health.
US Stimulus: Congress Continues Its Dance
Well, the Congressional music seems not to have stopped just yet—with the deeply divided House and Senate continuing their (unsurprising) stimulus dance. The negotiations have moved little since late July, when Senate Republicans released their outline for a $1 trillion bill (which they’ve since followed up with a scaled-back plan). For their part, Democrats have thus far remained committed to the House’s $3.5 trillion package, passed on a near-party-line vote in May.
But is further stimulus yet warranted?
Thoughtful Evolution in the ESG Era
ESG has been an increasingly hot topic over the past couple years—and if anything, the recent pandemic and accompanying market volatility have accelerated many ESG-related conversations. As a firm without a centralized research function or a CIO, Artisan Partners’ approach to ESG and related topics has necessarily looked different.
A Russian Crisis No More?
Russia has had its fair share of market-moving news this year. Normally, the dispute with Saudi Arabia over oil production and President Putin’s announcement he would reset his term limits would take center stage—yet both have been overshadowed by the dual threats of COVID-19 and the corresponding pressure on oil demand. The economy has predictably struggled, with GDP down 9.6% YOY in Q2, while personal incomes fell 8.0%. Predictably, the ruble has also weakened relative to both the euro and USD—likely a byproduct of not only relative economic weakness but also the oil price collapse.
While the market has responded as we might expect (the MSCI Russia Index is down 22.5% YTD through July in USD terms), Russia is nevertheless still near the middle of the EM pack. It trails countries which have rebounded sharply, such as China and Taiwan, while leading harder-hit compatriots Brazil, Turkey, Hungary and Greece.