Global ETF News Older than One Year
How Do Rising U.S. Interest Rates Affect Emerging and Developing Economies ? It Depends
December 21, 2022--This paper examines the implications of different types of interest rate shocks in the United States for emerging market and developing economies (EMDEs). It first classifies changes in U.S. interest rates into those caused by changes in inflation expectations ("inflation" shocks), changes in perceptions of the Federal Reserve's reaction function ("reaction" shocks), and changes in real activity ("real" shocks).
The analysis attributes this year's sharp increases in U.S. interest rates almost exclusively to inflation and reaction shocks. These types of shocks are found to be associated with especially adverse effects: EMDE financial conditions tighten, consumption and investment fall, and governments cut spending to improve budget balances. By comparison, rising U.S. interest rates stemming from real shocks are not only associated with benign outcomes for EMDE financial conditions but also improvements in budget balances that reflect higher revenues as well as lower expenditures. Finally, this paper documents that rising U.S. interest rates driven by reaction shocks are especially likely to push EMDEs into financial crisis.
Source: worldbank.org
The hidden costs of investing in US equity ETFs
December 22, 2022--Experts point out that it is not all about the fees. There are also currency, trading costs, spreads and tax considerations
Checking your investments too often can be a good way to end up out of pocket.
This wisdom, gained from behavioural finance experiments showing that too much information leads to "myopic loss aversion", could lead investors to believe they should just "set it and forget it". However, experts insist you should know what you own, and even if you want to retain the same exposure, you should check to see if there is now a cheaper way of doing so.
In the fast-evolving investment fund industry, this can often be the case. First, exchange traded funds usually offer much lower fees than their mutual fund counterparts, and this partly explains why they continue to grab market share.
Source: ft.com
WTO-Services trade activity likely to weaken with slowing growth in major economies
December 22, 2022--World services trade activity appears to have weakened in the fourth quarter of 2022 and is likely to remain soft in the opening months of 2023, with slowing growth in major economies weighing on the post-pandemic recovery, according to the latest WTO Services Trade Barometer released on 22 December.
The Barometer index reading for the month of October fell to 98.3, slightly below its baseline value of 100 and well below the previous reading of 105.5 from the last release in June. The findings are line with the Goods Trade Barometer issued in late November which indicated slowing merchandise trade volume growth in the closing months of 2022 and into 2023
Source: WTO (World Trade Organization)
Metaverse storms ETF charts to become industry's hottest concept
December 19, 2022--A total of 35 vehicles have now launched since the first was unveiled in June last year
The metaverse has become the hottest concept ever in the history of exchange traded funds-despite steady media coverage suggesting there has been little interest in the "sub-theme".
A total of 35 metaverse-badged ETFs have launched globally since the first rolled off the conveyor belt in June 2021, according to data from Morningstar.
Source: ft.com
IMF Working Paper-Macroeconomic Effects of Climate Change in an Aging World
December 16, 2022--Summary:
Climate and demographic changes are two major long-term trends that are evolving simultaneously. The global population is aging, while climate change is increasing the frequency and severity of weather-related disasters and lowering productivity.
This paper examines the macroeconomic effects of these three changes in a common framework.
Simulation results suggest that while aging drags down the real interest rate, climate change puts upward pressure on the real interest rate and inflation. As climate change intensifies, it will be the dominant factor shaping the macroeconomic variables. This results in higher inflation and a higher debt-to-GDP ratio, requiring tighter fiscal and monetary policies. The results further suggest that economic uncertainty induced by climate change amplifies these effects of climate change.
Source: imf.org
Riding the Global Debt Rollercoaster
December 12, 2022--The weaker growth outlook and tighter monetary policy call for prudence in managing debt and conducting fiscal policy
Global debt remained above pre-pandemic levels in 2021 even after posting the steepest decline in 70 years, underscoring the challenges for policymakers.
Total public and private debt decreased in 2021 to the equivalent of 247 percent of global gross domestic product, falling by 10 percentage points from its peak level in 2020, according to the latest update of the IMF's Global Debt Database. Expressed in dollar terms, however, global debt continued to rise, although at a much slower rate, reaching a record $235 trillion last year.
Source: imf.org
Can financial markets make a difference to natural assets?
December 12, 2022--The challenge
Three decades on from the Rio Earth Summit, almost two decades since the coinage of the term ESG (environment, social, and governance issues), and seven years on from the dual launch of the Paris Climate Agreement and UN Sustainable Development Goals (SDGs), mainstream economic and financial systems can no longer ignore their dependence and impact on the planet's ecological systems.
Business models need to change to better account for the full range of costs and benefits that they generate. The sheer scale of that change requires a pivotal role of private enterprise and private capital, complementing and multiplying public sector efforts at national and international levels.
The challenge is one of execution. How do we create and deepen markets for ecological solutions when the origin of the problem lies in externalities and market failure? How do we create financial markets where previously--unbankable projects can be securitised into investable assets?
Source: LSE Business Review
Global Food Prices to Remain Elevated Amid War, Costly Energy, La Niña
December 9, 2022--Interest-rate hikes have eased price pressures, but the weather, war and material costs could keep food prices elevated for longer
Food prices, which reached a record earlier this year, have increased food insecurity and raised social tensions.
They have also strained the budgets of governments struggling with rising food import bills and diminished capacity to fund extra social protection for the most vulnerable.
To better understand the scale of these unprecedented challenges for global policymakers, we quantify in new research the typical impact of four historically important drivers of food commodity prices.
Source: imf.org
BIS-Markets swayed by inflation and growth prospects
December 5, 2022--Changes in the anticipated monetary stance and in the economic outlook continued to shape financial markets in the review period.1 The interplay of shifting inflation dynamics and deteriorating growth gave rise to two phases.
In the first, from mid-September to mid-October, inflation readings came in stronger than anticipated, pushing up expectations of policy rates in the near future. In the second, through November, lower than expected inflation and weakening economic activity led markets to reassess downward the extent of policy tightening ultimately needed to contain inflation. These developments kept asset price volatility elevated in the context of poor liquidity conditions across market segments, contributing to swings in global financial conditions.
Source: BIS
Goldman makes 'white-label' bet on white-hot ETF market
December 1, 2022--Decision to launch platform for other managers endorses view that ETFs will continue to seize market share
Goldman Sachs' decision to become the first big-name institution to launch a "white label" exchange traded fund business is being seen as a large bet that ETFs will continue to seize market share from mutual funds.
The arrangement allows smaller fund managers and new entrants to launch ETFs more quickly and cheaply, with the white labeller providing services such as distribution, marketing, capital market support, custody, compliance, seed funding and administration.
Source: ft.com
