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Gold: No Grounds for a Correction?

This week, gold surpassed the historic threshold of $4,000 per ounce. With an increase of more than 50% so far this year, prices are on track to post their best performance since 1979, the year when gold reached its previous all-time high adjusted for inflation.

So far this year alone, gold has already reached 52 new all-time highs. The year-to-date return is approaching 54%, already marking the highest annual return since 1979. The interest is undeniable—in September, gold ETFs recorded their best month ever. Net inflows of $17.3 billion were led by North America and Europe, with Asia also joining the rally with $2.1 billion.

In contrast to these highs, the analysis by José Manuel Marín Cebrián, economist and founder of Fortuna SFP, offers another perspective: it’s not that gold is expensive, but rather that money is losing value. “Gold is a barometer. Its quantity in the world increases slowly—around 1.5% annually through mining production—making it a store of value against currencies that multiply under monetary policies. When gold rises in dollars, euros, or yen, it is actually revealing the loss of purchasing power of those currencies. It’s a mirror that reflects distrust in the current monetary system,” he argues.

A Favorable Environment

Whether or not there are doubts about the current monetary system, the reality is that we are in a favorable environment for gold’s performance. “The slowdown in the U.S. economy, along with expectations of lower interest rates and a weaker dollar, should continue to attract safe-haven seekers to the market, while central bank purchases should also remain strong. We see very limited likelihood of a major correction, although we believe a temporary pullback could occur due to bullish market sentiment. Overall, we reiterate our constructive view and raise our price targets,” argues Carsten Menke, head of next generation research at Julius Baer.

According to the experts, this movement reflects a consistent trend of portfolio reallocation toward safe-haven assets, in a context of heightened macroeconomic uncertainty and geopolitical tensions. “In this scenario, the precious metal reaffirms its role as the leading store of value amid weakening global growth prospects,” states Antonio Montiel, head of analysis at ATFX Education.

Will There Be a Correction?

In Menke’s opinion, given price developments over the past two weeks, speculative positioning in futures has likely turned more bullish, with trend followers and technical traders entering the market ahead of the $4,000 per ounce milestone.

For Regina Hammerschmid, commodities portfolio manager at Vontobel, downside risk is minimal. “Given all the structural factors—weakening dollar, concerns over U.S. debt and government shutdown, Fed independence, elevated geopolitical risks—and cyclical ones—weakening U.S. labor market, Fed rate cuts, growth concerns driven by tariffs—pushing gold higher,” says Hammerschmid.

Still, what could stop this record rally? According to Julius Baer’s expert, historically, major corrections have almost always been triggered by improvements in economic outlooks and tighter monetary policies. “Since the Federal Reserve has just resumed its monetary easing cycle, we see very limited likelihood of that scenario repeating. A more probable scenario would be speculative fatigue, meaning all the good news is already priced in and this last leg of the rally is a case of ‘too fast, too far,’” he notes.

That said, he believes such fatigue should not trigger a correction, but rather a temporary and short-term pullback, as the fundamental environment for gold remains favorable. “Assuming a target gold allocation of 20% to 25%, in line with the global average, purchases should continue for another three to five years, according to our analysis. Therefore, we reiterate our long-term constructive view on gold, raising our price targets to $4,150 per ounce in three months and $4,500 per ounce in twelve months,” estimates Menke.

Getting Exposure to Gold

To take advantage of this rally, Marco Mencini, head of analysis at Plenisfer Investments (Generali Investments), believes the market offers two financial alternatives for gaining gold exposure: producer stocks and exchange-traded funds (ETFs).

“Despite the strong performance of producer stocks so far this year, their valuations remain attractive. Many companies are generating free cash flow (FCF) yields between 7% and 9% (high single digits) and between 10% and 12% (low double digits) relative to their market capitalization. The figure varies by company, but considering the low leverage levels, current levels offer favorable prospects. It is often thought that the profitability of gold producers cannot keep pace with the metal’s price. However, the EBITDA data from major sector ETFs—like the GDX (VanEck Gold Miners ETF)—disproves this perception,” says Mencini.

On approaching this opportunity through equities, James Luke, commodities fund manager at Schroders, highlights that gold miners are generating record margins and have significantly strengthened their balance sheets, yet their valuations are still not fully priced in. “The market is only just beginning to pay attention to them. Despite the recent boom, we must not forget that gold equity funds have seen net outflows of nearly $5 billion over the past year and a half. Investors who are not invested wonder if they missed the boat, and those who are invested wonder if it’s time to sell,” he comments.

In his view, gold stocks are not expensive and represent a good investment opportunity, at least from three perspectives: “The performance of gold stocks remains very disconnected from record free cash flow margins (which continue to grow). Additionally, gold miners are trading at low-adjusted valuations and are significantly strengthening their balance sheets. And finally, there are no signs of euphoria in the sector—rather the opposite.”

Collapse in France: A Local Issue, With Little Sign of Contagion

| By Amaya Uriarte | 0 Comentarios

Renta variable de income segun BNY25 — Canva

Political Noise Rises in France After Prime Minister Sébastien Lecornu Submitted His Government’s Resignation on Monday to President Emmanuel Macron, less than a month after taking office and just one day after presenting the new composition of his cabinet. The question now is: what impact will this new political collapse have on European markets?

So far, the market’s reaction has been relatively moderate following the resignation of French Prime Minister Lecornu, less than a month after his appointment. “The euro is down 0.6%, French government bond spreads have risen 5 basis points in the intermediate and long maturities, and credit spreads of major French issuers have widened by just a couple of basis points. As for equities, the CAC 40 is down less than 1.5%, with banks and utilities the most affected, while most of the French large-cap index heavyweights have dropped less than 1%,” summarizes Kevin Thozet, member of the Investment Committee at Carmignac.

For now, investors are passively following the twists and turns of French politics, trying to separate noise from signal. “French Treasury issues have not been affected by this lack of visibility, and we still believe this interest rate level represents an entry point. However, we observe a slight appreciation of the dollar, reminiscent of its safe-haven status, as well as the upcoming rating agency calendars, which could add noise from time to time. Moody’s will announce its decision on October 24, and Standard & Poor’s on November 28,” comments Mabrouk Chetouane, Head of Global Market Strategy at Natixis IM Solutions (Natixis IM).

In the view of Peter Goves, Head of Developed Markets Sovereign Debt Research at MFS Investment Management, this situation adds a new layer of uncertainty to the markets. “The situation is obviously very fluid, and it is uncertain what exactly will happen next. This is one of the reasons why OAT-Bund spreads remain wide and could widen further,” he says. In the short term, he sees it as plausible that Macron may appoint a new prime minister, but “in any case, all the fundamental issues remain: how to pass a budget in a highly fragmented parliament.”

Goves shares this reflection while acknowledging the rising possibility of new parliamentary elections, the outcome of which is inherently unknowable, but represents an event risk that could result in RN gaining seats. “This remains a French matter, with limited contagion effects for the euro area as a whole. Our main takeaway is that it is difficult to argue for a significant narrowing of the OAT-Bund spread at this time,” he adds.

Experts from asset managers agree that increased uncertainty about how the political situation will be resolved does not support market sentiment. “This morning, the spreads between French treasury bonds — OATs (Obligations Assimilables du Trésor) — and German bonds have approached the historical highs of December 2024, which we view as fair, as it reflects rising electoral risk. France is trading notably above its European peers. For a further increase, one would expect new elections and a decisive swing in the polls to the right or left,” argues Alex Everett, Senior Investment Director at Aberdeen Investments. According to his analysis, overall OAT bond trading remains fairly orderly despite the political noise. “Markets are waiting for President Macron’s next move,” Everett notes.

For Michaël Nizard, Head of Multi-Asset & Overlay, and Nabil Milali, Portfolio Manager Multi-Asset & Overlay at Edmond de Rothschild AM, this political turmoil “could intensify upward pressure on French interest rates and deepen the undervaluation of the CAC 40, with significant risk that tensions spread to other assets such as French banks, the euro, and peripheral spreads.”

Possible Scenarios

It is clear that Lecornu’s resignation worsens France’s political and economic unrest. “The current political turmoil increases the risk of delays in approving the 2026 budget and significantly limits the chances of the upcoming budget including meaningful fiscal consolidation measures. This uncertainty further undermines confidence in the sustained execution of the government’s consolidation plan and raises the likelihood of fiscal outcomes being worse than expected,” comments Thomas Gillet, Director and Analyst of the Public and Sovereign Sector at Scope Ratings.

According to the expert from Aberdeen Investments, for opposition parties, this is further proof that Macron-aligned groups cannot lead Parliament, and so calls for new elections will intensify.

“New elections would further reduce President Macron’s control, so appointing another prime minister may be his preferred option. However, the discontent expressed by nearly all parties — including the Republicans and Socialists, who had so far shown more support — makes it clear that there is very little interest in reaching a consensus. At this moment, we see little reason for political optimism, as even the status quo of a new prime minister would likely only further incite opposition party anger,” he argues.

“Although the likelihood of the president resigning seems low, neither a new dissolution of the National Assembly nor the appointment of a more left-leaning prime minister can be ruled out. The latter scenario would reopen the possibility of additional fiscal measures on companies, a factor we continue to monitor closely in our portfolios,” says Flavien del Pino, Head of BDL Capital Management for Spain.

For his part, Gillet explains that President Macron now faces a limited number of options: appoint another prime minister to attempt new coalition negotiations or call early legislative elections. “However, growing political fragmentation and polarization, along with upcoming electoral milestones, are making France’s political outlook increasingly complex, raising the risk of greater short-term instability,” he notes.

Fiscal Expansion and Loose Economic Policy: The Promises of Takaichi Sanae for Japan

| By Amaya Uriarte | 0 Comentarios

The Markets Have Reflected the Surprising Victory of Takaichi Sanae as Prime Minister of Japan, With Stock Market Gains, a Boost in Fixed-Income Yields, and a Weaker Yen. Specifically, JGB bonds have continued to rise even as the Nikkei reached a record before Takaichi’s victory, due to the opposition’s call for tax cuts and speculation over rate hikes by the Bank of Japan (BoJ).

“Since she was not the favorite to win, the market had to quickly price in the impact of Takaichi’s policies on fiscal stimulus, industrial policy, and her moderate monetary outlook. The ‘Takaichi effect’ triggered a rise in equities, a weakening of the yen, and a sell-off of long-term bonds. However, some of these reactions may be excessive. The details of Takaichi’s election campaign reveal a more moderate stance on monetary and fiscal easing than the headlines suggest,” says Sree Kochugovindan, Senior Research Economist at Aberdeen Investments.

According to experts, with Takaichi’s rise to power, we could see more movement in financial markets, given her more interventionist stance and her promises to increase fiscal stimulus. “However, large public spending in a country where debt already represents 260% of GDP is something that can spook bond markets — and likely will. Nevertheless, it’s worth noting that most of Japan’s debt is held by domestic investors, which means it is less vulnerable than, for example, the UK’s debt,” warns Anthony Willis, Senior Economist at Columbia Threadneedle Investments.

Willis is struck by Takaichi’s remarks about the BoJ, which she called “stupid” for raising interest rates. “With inflation entrenched in Japan and hovering around 3%, the Bank of Japan is likely to raise rates further from what is currently an 18-year high. However, at 0.5%, they still remain relatively low,” he comments on the country’s monetary policy.

After Her Victory

As for what to expect now, experts see it as likely that equities will continue to rebound while the Japanese yen weakens, given Takaichi’s proposed plan for fiscal expansion and monetary policy easing. “A BoJ rate hike in October now appears to be off the table, as swaps now reflect only a 20% probability of a hike, down from more than 60% last week. However, yen weakness could be limited due to the narrowing of interest rate differentials between Japan and the United States. Realistically, she may still face challenges in pushing through her policies, as the Liberal Democratic Party (LDP) no longer holds a majority in either the upper or lower house of Parliament. Overall, Takaichi’s victory is positive for equities — excluding banks — and we see a more growth-friendly environment for equities,” say Magdalene Teo and Louis Chua, Fixed Income and Equity Analysts, respectively, at Julius Baer in Asia.

In the opinion of John Butler, Macro Strategist at Wellington Management, the new prime minister wants the government to lead fiscal policy while the BoJ simply executes. “Japan needs higher interest rates: it has to manage 5% nominal growth, which is above its long-term trend, and unemployment is at historic lows. The yen is being affected because real rates are now very low and the new government wants to implement an expansionary fiscal policy. I believe Japan is a great inflation story, and this is good for risk assets, particularly Japanese equities. However, all the risk now lies with the BoJ: it might raise rates if the yen goes to 1.5, but that would be a defensive move. It could raise rates in October, though I see December as more likely,” he explains.

Experts at Julius Baer acknowledge that Takaichi’s victory has brought to the forefront the policies proposed in her campaign, which are built on three pillars: managing national crises and economic growth, expansive fiscal policy, and her belief that the government is responsible for monetary policy while the Bank of Japan (BoJ) autonomously chooses the best tools. “With her leadership win, takaichi’s political stance is certainly bullish for stocks, but weighs on the yen and bonds, given the possible delay in rate hikes,” they emphasize.

For her part, the Senior Research Economist at Aberdeen Investments explains that, as a staunch conservative and protégé of the late Prime Minister Shinzo Abe, markets have started to price in Takaichi’s policies on fiscal stimulus, industrial policy, and a moderate monetary outlook. “But the softening of policy details in the campaign, the constraints of divisions within the Liberal Democratic Party, the minority government, and the bond market mean we do not expect policy changes from the Takaichi administration on the scale of Abenomics,” she concludes.

The 300 Largest Pension Funds in the World Surpass 24 Trillion Dollars in Assets

| By Amaya Uriarte | 0 Comentarios

300 largest pension funds surpass 24 trillion — Canva

The 300 leading pension funds in the world have reached a record volume of 24.4 trillion dollars in assets under management as of the end of 2024, according to the Top 300 Pension Funds report prepared by the Thinking Ahead Institute of WTW, in collaboration with Pensions & Investments.

According to the authors of the report, this figure represents a new milestone for the sector, surpassing the previous peak recorded in 2021, which was 23.6 trillion, and marking three consecutive years of recovery following the 2022 market correction. Even so, they explain that the growth rate has slowed: assets increased by 7.8% in 2024, compared to the 10% rise recorded in 2023.

Asset Concentration and New Priorities

The report also highlights an increase in concentration: for the first time, the 20 largest funds collectively manage more than 10.3 trillion dollars, representing 42.4% of the Top 300 total. “This subgroup grew 8.5% year-over-year, outpacing the growth rate of the overall ranking,” the report concludes.

Among the emerging strategic priorities, the document notes a greater focus on artificial intelligence: 10 funds are strengthening their AI capabilities, and 9 already consider it a priority pillar of their portfolio management. Likewise, volatility, macroeconomic uncertainty, and inflation are consolidating as the main concerns for these institutional investors.

Shift in Global Leadership

Norway’s sovereign fund, the Government Pension Fund, has become the largest fund in the world with 1.77 trillion dollars, overtaking for the first time in over 20 years Japan’s Government Pension Investment Fund (GPIF).

By region, North America consolidates its leadership, accounting for 47.2% of total assets in 2024. Although Europe slightly reduces its share to 23.7%, it continues to play a strategic role in shaping more sustainable pension models and in the adoption of ESG criteria in institutional investment. In countries such as the Netherlands and the United Kingdom, advanced practices in governance and portfolio diversification are observed. Asia-Pacific, for its part, represents 25.5%, also showing a slight decline.

According to Juan Díez, Investments Associate at WTW Spain, large pension funds are facing an increasingly complex landscape. “In an environment of rising macroeconomic volatility and growing geopolitical tension, high market concentration has catalyzed this effect, even impacting well-diversified portfolios,” he argues.

On the other hand, Díez emphasizes that the conclusions of the Top 300 report are clear: “The importance of these investment vehicles for public bodies, private companies, and individuals is at a historic high, as demonstrated by the record volume of assets under management. Faced with the growing complexity and importance of their role, funds are responding. More and more, they seek to raise governance standards, focus on long-term outcomes, and improve decision-making by exploring more innovative approaches such as the Total Portfolio Approach.”

Why 2025 Could Be Another Record Year for Global Dividends

| By Amaya Uriarte | 0 Comentarios

global dividends record year 2025 — Canva

Global dividends recorded a strong increase in the first half of 2025, with a year-over-year rise of 7.7% in gross terms, reaching a record figure of 1.14 trillion U.S. dollars—almost matching the total for the entire year of 2017—according to Dividend Watch, part of the Capital Group Global Equity Study.

As explained in its conclusions, the total income figure for the first half was boosted by the weakness of the U.S. dollar, as dividends from Japan and Europe, in particular, were converted at much more favorable exchange rates. However, the growth of “core” dividends—which adjusts for factors such as special dividends, exchange rates, and other minor elements—was an encouraging 6.2%.

“2025 is shaping up to be another strong year for global dividends, with a solid first half and balanced growth across all regions and sectors. We remain optimistic and believe that the second half of 2025 will continue to show strong global dividend growth,” says Alexandra Haggard, Head of Asset Class Services for Europe and Asia-Pacific at Capital Group.

In her view, dividend flows can be a strong indicator of a company’s financial health and stability. “Companies that consistently pay and increase dividends typically demonstrate solid earnings, healthy cash flow, and disciplined management. By tracking dividend trends, investors can better understand company performance and their resilience to economic challenges,” she explains.

Finances Will Be Key Factors in 2025

In examining sector trends, the report identifies that the combination of the financial sector’s large size and favorable economic conditions led it to contribute two-fifths of global dividend growth in the first half of the year. The sector recorded a 9.2% year-over-year increase in core payments, reaching a record 299 billion U.S. dollars. In this regard, banks accounted for just under half of the total increase in the financial sector, and the 13 banks that contributed most to dividend growth in the first half came from various markets, indicating widespread global strength.

Other sectors that experienced robust growth included transportation—particularly shipping and airports—machinery, especially aerospace and defense groups, and software. Globally, 86% of companies increased or maintained their dividends in the first half, with an average corporate-level “core” dividend growth of 6.1% year-over-year.

Regional View: Japan, the Leader
Total income in the first half reached record levels in the United States, Canada, Japan, much of Europe, and some emerging and Pacific markets, although there was notable weakness in Australia, Brazil, Italy, China, and the United Kingdom.

Growth was strongest in Japan, where core payments rose 13.8% year-over-year, more than double the rate of the rest of the world. The record payments of 54.9 billion U.S. dollars reflect unprecedented profits and a shift in corporate culture that is returning more capital to shareholders.

The United States was the largest contributor to the year-over-year increase of 71.3 billion U.S. dollars in global payments in the first half, due to its massive size. Its core dividend growth rate of 6.1% was in line with the global average, although lower extraordinary income tempered the increase in gross income.

The second quarter is the key dividend season in Europe, and growth this year was slower compared to the past four years. Core dividend growth for the first half was 5.6% year-over-year, a rate lower than the rest of the world. Cuts by European car manufacturers, in particular, caused the region’s dividend growth to fall by a third in the first half of the year.

As highlighted by Mario González, Head of Capital Group in Iberia, US offshore, and Latam, Spanish dividends reached a record 16.7 billion U.S. dollars in the first half of 2025, representing a 12.7% increase in the core figure. “Companies that pay dividends have long served as a safe harbor in the storm, offering investors a cushion when markets turn volatile. Their ability to generate income even in times of recession makes them an attractive anchor for clients in Spain seeking resilience and reliability,” he comments.

Brazil, Chile, and Mexico: Three Stories with Nuances in Their Growth

| By Amaya Uriarte | 0 Comentarios

Brazil Chile and Mexico nuanced growth — Canva

One of the most frequently repeated observations among experts from international asset managers is that Latin American countries are in a relatively advantageous position regarding tariff risks compared to other regions. However, according to Principal AM in its economic outlook, this reality could be changing, especially for Brazil and Chile.

“Although the impact on growth could be limited, uncertainties about the effects of tariffs could generate greater volatility in the region, precisely at a time when discussions around local elections are gaining importance. The good news could be related to inflation. With slower economic activity, if currencies remain stable thanks to a weaker dollar (DXY), tariff announcements could have a disinflationary effect in the region,” they point out.

Brazil: Maintaining the Pace

According to the asset manager, the most recent economic data confirmed that growth is slowing in Brazil. “Although second-quarter GDP surprised positively by growing 0.4% quarter-on-quarter, the underlying details point to a broader economic slowdown, with weakening in both consumption and investment. More importantly, preliminary data from July and August suggest a more pronounced slowdown in the third quarter,” they comment.

Looking ahead, they highlight that the short-term inflation outlook remains favorable. As a result, they maintain that the good performance of the exchange rate and the sharp slowdown in wholesale inflation point to a downward bias for inflation in the coming months. “As a result, inflation expectations for 2025 have continued to decline in recent weeks, while long-term expectations remain unanchored. In this scenario, the likelihood increases that the Central Bank will begin a monetary easing cycle in the coming months. Despite the need to maintain tight monetary restrictions, the slowdown in activity and the behavior of inflation allow some room for initial easing. We adjusted our projection for the start of rate cuts to the first quarter of 2026, with a terminal rate of 13% by year-end,” they add.

Chile: Contraction Due to Temporary Factors

In the case of Chile, the report from Principal AM highlights that economic activity grew 1.8% year-over-year in July, slightly below the market’s median expectation of 1.9%, marking the weakest expansion since February. Meanwhile, in August, inflation posted a monthly variation of 0.0%, surprising on the downside relative to expectations. As a result, headline inflation dropped from 4.3% in July to 4% year-over-year, accumulating 2.9% so far in 2025.

“Activity grew 1% compared to the previous month and 2.3% year-over-year, reflecting some resilience but also signs of a slowdown. The decline in the mining sector was one of the main factors behind the result; however, much of this contraction is linked to temporary factors, such as the effects of international tariffs and the accident at the El Teniente mine, suggesting that recovery in the sector may take longer, although the medium-term outlook remains favorable,” it explains.

According to the asset manager’s view for Chile, although headline inflation remains on track to converge to the 3% target by the third quarter of 2026, “the process will be slower and will depend on the evolution of domestic demand and labor costs, leaving monetary policy in a neutral and data-dependent stance in the coming months.”

Mexico: Expansion Continues

Lastly, in the case of Mexico, the asset manager highlights in its outlook that the final estimate for second-quarter 2025 GDP confirmed that the economy expanded for the second consecutive quarter, with a 0.6% quarterly growth (seasonally adjusted) and 1.2% year-over-year (adjusted). “Although slightly below the preliminary estimate (0.7% quarterly), the result still points to a stronger transition into the second half of the year. GDP growth in the second quarter was driven mainly by heterogeneous dynamics within the services sector, supported by stable real wages and household incomes. Cumulative growth so far this year stands at 0.9% for the first half of 2025, suggesting that the economy has managed to avoid a mild contraction despite persistent challenges,” the report notes.

On inflation, the document indicates that the rebound seen in August was due to “base effects.” It observes that inflation in services remains elevated, reflecting a resilient tertiary sector, while goods prices continue to face cyclical and supply chain pressures, as recent business surveys suggest.

“Looking ahead, if headline and core inflation remain near current levels, it is likely that the easing cycle will continue, especially considering that the slowdown in the U.S. labor market gives the Fed room to resume its own rate cuts,” the document concludes.

The Risk Is an “Information Blackout” in Labor Market Data

| By Amaya Uriarte | 0 Comentarios

Since 1976, there have been 20 partial shutdowns with an average duration of one week, although the longest lasted 35 days. Throughout history, only four of these shutdowns extended beyond a single business day. The most recent was the 35-day standoff between late 2018 and early 2019—the longest shutdown in U.S. history—which occurred during President Trump’s first term. A new actual shutdown will now be added to that list as of October 1. What do investors need to know about this shutdown?

First, that shutdowns are not uncommon; and second, historically, Treasury bonds have served as a safe-haven asset during these periods—though it will be interesting to see if that remains the case given the recent challenges observed.

“The S&P 500 has shown little movement during shutdowns, but stocks and bonds typically fall before shutdowns and rebound once they begin, as expectations of a resolution increase. Prolonged shutdowns, like the 35-day one in 2018–19, can affect GDP and unemployment, although these effects tend to reverse once the crisis ends,” says Benoit Anne, Senior Managing Director and Head of the Market Intelligence Group at MFS Investment Management.

A Limited Impact

According to experts, the market impact is minimal. “As investors, we now find ourselves at a point where we must deal more regularly with the flow of news coming from Capitol Hill. Fortunately, the economic and market impact of shutdowns has always been limited. We expect the same to happen this time,” notes AllianceBernstein.

However, a limited impact does not mean no impact. As AllianceBernstein explains in its latest report, during the longest recorded shutdown—the partial shutdown of 2018—the cost reached approximately 11 billion dollars in GDP. Still, the Congressional Budget Office estimates that once payments resumed, only 3 billion were permanently lost. That amounted to around 0.02% of 2019 GDP, meaning the lasting economic impact was more moderate.

“Compared to the risks of hitting the debt ceiling, a shutdown is notably less severe. That said, consumer confidence has already been under pressure, and a prolonged shutdown could pose additional risks to consumer sentiment. This time, although some services and departments would continue to operate, many will pause unless alternative sources of funding are found. Most importantly for the economy: millions of federal civilian employees and active-duty troops will not be paid during the stalemate. Some are paid weekly, others biweekly—an important consideration if the deadlock lasts more than a few days,” the firm explains.

However, for the experts at Raymond James, this shutdown is not linked to the debt ceiling:

“Although the media often conflate the two issues, it’s important to understand that a government shutdown is not directly tied to the debt ceiling. In this case, if a shutdown occurs in the coming days, it would not imply a default on U.S. public debt. Remember, the debt ceiling was already raised by 5 trillion dollars (to 41 trillion) as part of the new fiscal law, likely deferring this issue until 2027.”

The Key Issues

According to Kevin Thozet, member of the investment committee at Carmignac, the market’s mild reaction hides the complex economic dynamics beneath the surface, which could add to growing political uncertainty across the Atlantic:

“It’s unlikely that fundamental questions about the state of the U.S. labor market will be answered in the short term. And this is the crucial point in the debate over whether the U.S. economy is going through a temporary slowdown or entering a recession. In addition, the shutdown could lead the U.S. government to prolong the DOGE mission and cut some public spending, although the implementation or even the feasibility of such a plan remains unclear,” Thozet says.

For Luke Bartholomew, Deputy Chief Economist at Aberdeen Investments, routine is what explains why the market has responded calmly to this shutdown:

“After the shutdowns of the past 15 years, there’s now a well-established playbook, especially considering this one is not related to the debt ceiling. The longer the shutdown lasts, the greater the economic drag—it could mean a reduction in growth of around 0.15% per week,” Bartholomew says.

Still, the Aberdeen expert believes the most significant market impact could be the slowdown in the release of crucial labor market data:

“It is very likely that the Fed will cut rates again in October, but given how central the labor market is to its current approach, and the political pressures it faces, this lack of clarity in the data will certainly not make its job easier,” he adds.

Benoit Anne of MFS Investment Management agrees that one major consequence is the suspension of economic data collection by the government, which can leave investors and Federal Reserve policymakers temporarily in the dark:

“Overall, our Market Insights Group does not believe government shutdowns represent a significant market-moving event. However, they can create opportunities for investors to take advantage of short-term market disruptions caused by overreactions and headline-driven risks,” Anne adds.

In this regard, Amar Reganti, fixed-income strategist at Wellington Management, notes that:

“President Trump has alluded to the possibility of firing federal employees during the shutdown and not rehiring them afterward. This would add further downward pressure on the labor market and increase the likelihood that the Federal Reserve cuts official interest rates in its upcoming meetings.”

The Political Dimension

Experts explain that this shutdown has resulted from political disagreements between Republicans and Democrats on issues such as healthcare—but it reflects the country’s increasing political polarization.

In the opinion of Eiko Sievert, public and sovereign sector analyst at Scope Ratings, doubts about the independence and credibility of key institutions have intensified in recent months:

“Overall, this deterioration in governance standards will further increase political polarization in the coming years. The deeper these political divisions become, the greater the risk that key political agreements won’t be reached on time,” Sievert argues.

She believes this also applies to future standoffs over the debt ceiling—especially if the Republican Party loses control of the House of Representatives and/or the Senate following the 2026 midterm elections:

“Despite the 5 trillion dollar increase in the debt ceiling passed as part of the Big Beautiful Bill, it is likely that a new increase will be needed by 2028, given the weak fiscal outlook. We forecast deficits of around 6% of GDP and a rise in national debt to 12% of GDP over the next five years. Our base case remains that a technical default by the U.S. due to political disputes is unlikely, but the risk is rising and would have a significant impact if it materialized,” she concludes.

Latin America: Target for ETF Distribution

| By Amaya Uriarte | 0 Comentarios

A study by Brown Brothers Harriman (BBH) explores the commercial potential and the challenges faced by asset managers, distributors, and service providers operating across Latin America.

The report notes that investors, in general, appreciate the evolution and innovation in the ETF industry, with exchange-traded products covering an increasingly broad set of assets and a range of investment strategies with ever-expanding geographic reach.

Competitive costs, flexibility, transparency, and the strong diversification potential of ETFs are also proving to be attractive features in an increasingly uncertain world.

And although much of the history of ETFs to date has focused on North America and Europe, other markets, such as Asia, are also catching the ETF fever. Elsewhere, ETF products are also generating growing interest in Latin American markets, particularly in Brazil, Mexico, Colombia, and Chile.

As ETF managers and issuers increasingly seek to expand the distribution of their funds, the sales of Europe-domiciled products have followed the evolution of regional investor interests. And according to the BBH study, Latin America has become a “clear target” for ETF distribution. It even cites some estimates suggesting that the Latin American ETF market could exceed $40 billion in size by 2030.

The region continues to register significant growth in the ETF market. Many of these products are domiciled in Europe and are distributed through cross-border UCITS funds.

While ETF / UCITS ETF sales in Latin America have been driven by institutional investors, such as local pension plans—especially in markets like Mexico—the firm believes that, over time, significant opportunities could also emerge in the retail market across regional markets.

The unique features of UCITS products (such as accumulation share classes that do not distribute dividends but reinvest them) are proving to be very popular among both Mexican retail investors and in offshore trading hubs in the United States and Canada.

Market Diversity
Although Latin America offers significant potential for managers promoting exchange-traded funds, the firm notes that the region “is far from being a homogeneous market.” As such, “it can be challenging due to local idiosyncrasies and fragmented investment cultures in the countries that comprise it.”

Additionally, the firm highlights that different regulatory standards may apply from one country to another, with some regimes more advanced and sophisticated than others. As an example, Colombia’s institutional investor regulations now allow for the direct allocation of ETFs as eligible instruments—through decree updates in 2024.

In Mexico, regulators have recently authorized pension funds, or Afores, to invest in active U.S. and international ETFs, although all must go through an approval process in order to be acquired by Mexican Afores. Traditionally, the funds have invested in passive ETFs.

Other local markets have also undergone recent regulatory changes. In Chile, for example, the local regulator—the Risk Rating Commission—modified its rules to allow pensions to invest in actively managed ETFs following a registration and approval process.

Varied Infrastructure
Market infrastructure also varies across the region. The Latin American Integrated Market (MILA) integration project offers cross-border operations that can streamline access for EU issuers targeting the participating markets of Chile, Colombia, Mexico, and Peru through a unified trading infrastructure.

A new project, NUAM, also promises greater integration of the stock exchanges of Colombia, Chile, and Peru through a brand-new, fully unified multi-country stock exchange. “Having a local presence or significant knowledge of the local market can be key for managers to earn the trust of local investors,” the BBH study notes, citing Colombia as an example. In this country, “working with local brokerage firms may be essential to access investors through Latin American ETF vehicles,” they point out.

A traditional path to market access in the region, according to the firm, is through European issuers partnering with global banks whose local branches can reach both institutional and retail clients. Digital wealth management platforms are also key channels for retail distribution and advisory in some Latin American markets. Here, there is strong support from European fund centers, such as Dublin and Luxembourg, which “have significant expertise and support asset managers targeting Latin America with UCITS ETFs and other products.”

The SEC Opens the Door for Asset Managers to Add ETFs to Mutual Funds

| By Amaya Uriarte | 0 Comentarios

SEC allows adding ETFs to mutual funds — Canva

The U.S. Securities and Exchange Commission (SEC) has published a planned order—currently open to public comment before any changes or developments—that specifically applies to Dimensional Fund Advisors and allows the firm to add exchange-traded share classes to mutual funds. According to experts, this is a discussion the industry has long anticipated.

“The Commission is taking a long-awaited step toward modernizing our regulatory framework for investment companies, reflecting the evolution of collective investment vehicles from being primarily daily redeemable funds to exchange-traded funds (ETFs),” said Commissioner Mark T. Uyeda.

As explained by Reuters, under the proposed change, a mutual fund could offer investors the opportunity to participate in its investment portfolio in the form of an exchange-traded product, known as an ETF share class. “Investors would be able to buy and sell shares of the exchange-traded mutual fund throughout the day at market price through their brokerage accounts, instead of waiting for a mutual fund order to settle at the end-of-day price. This has the potential to open access to a range of existing funds for investors who prefer owning ETFs due to their low cost, tax advantages, or liquidity,” they noted.

Offering different share classes of the same mutual fund is not new. As Reuters points out, these classes are currently often targeted at different investor groups or carry varying fee structures. However, they note that the change could blur the line between exchange-traded funds and traditional mutual funds.

In Uyeda’s view, this is a principled modernization. He emphasized that the application includes several safeguards: board oversight, adviser reporting, conflict monitoring, and investor disclosure. “These are not mere administrative formalities—they are essential guardrails and uphold the fiduciary duty,” he added.

For many in the industry, this planned order signals the SEC’s intent and marks the direction of change the agency aims to pursue. In this regard, Uyeda was clear: “The publication of this notice represents a substantive step forward, not just a procedural formality. It’s a signal that the Commission is willing to reexamine outdated restrictions, embrace innovation, and consider an exemption that could equally benefit investors, fund sponsors, and markets. It reflects the same innovative spirit that led to the creation of the first ETF more than three decades ago.”

20% Fewer Players and 48% Growth in Global Assets by 2029

| By Amaya Uriarte | 0 Comentarios

LFDE estrategia centrada en el espacio — Canva

The consolidation of the asset management industry is unstoppable. According to the latest edition of the report prepared by Morgan Stanley and Oliver Wyman, the number of asset managers will decline by 20% over the next five years. Additionally, global assets are projected to reach all-time highs of $200 trillion, representing an annual growth rate of around 8% and a cumulative increase of 48%.

These conclusions were reached after analyzing how the asset management business is evolving and how the industry consolidation process is progressing. “As players consolidate, internalize, and shift toward strategic partnerships, and wealth management clients raise their expectations and professionalize their relationships (for example, through the use of family offices and multi-family offices), growth opportunities are becoming scarcer and more concentrated. We expect the combination of these factors to drive consolidation, as mid-sized players become attractive acquisition targets for leaders seeking greater scale and diversification,” the report states.

According to the analysis in the report, the effects are already being felt: the number of transactions has entered a new normal of over 200 significant deals per year since 2022—double the rate of the previous decade—in both asset management and wealth management. “The asset management industry is no longer producing new fund or ETF managers: with an average of more than 150 over the past two decades, net annual additions of traditional asset managers have dropped to a handful in the past three years. Even the active private markets are showing a similar trend,” it notes as a key data point.

Consolidation Continues

The report estimates that by 2029, there will be over 1,500 significant transactions in asset and wealth management, resulting in up to 20% fewer asset managers with at least $1 billion in assets over the next five years. “Success in this new era of consolidation will require asset and wealth managers to consider mergers and acquisitions as a central lever in their growth strategies,” the report concludes in light of this trend.

When it comes to deal activity, mid-sized asset managers (with between $500 billion and $2 trillion in assets) are the most exposed. According to the report, they show lower profitability—with operating margins around 26%—compared to larger managers (around 44%) and smaller ones (around 36%). Their profitability has fallen by approximately 4 percentage points since 2019, while small and large firms have remained relatively stable. Furthermore, the report estimates that there will be between 30% and 40% fewer clients for asset managers, as clients consolidate, internalize more than they outsource, and seek to do more with less.

The Outcome of M&A Deals

Although most mergers in the asset management sector have historically struggled to deliver meaningful improvements in cost-to-income ratios, the report argues that “a new mergers and acquisitions strategy can generate value.” According to its analysis, approximately 40% of traditional managers managed to improve their cost-to-income ratios three years post-deal, with the greatest cost savings coming from support and control functions. The firms that succeeded were those that balanced aggressive cost-cutting with careful management of client attrition following the merger. Moreover, three years after the deal, one-fourth of merged firms significantly outperformed the market’s organic growth rates. “Successful firms focused on client and product complementarity rather than merely on generating cost synergies,” the document notes.

Another key finding is that half of the alternative investment firms acquired by traditional managers grew significantly faster than the market by leveraging—and improving—the traditional manager’s distribution scale. In this regard, the report concludes that further value is likely to be unlocked by incorporating alternative managers into pension funds in Europe and the United States.

Types of Transactions

These arguments are fueling sector consolidation, which, according to the report, is taking place through three types of transactions. It notes that bank-affiliated wealth managers involved in M&A activities improved their cost-to-income ratio (CIR) by 0.5 points between 2022 and 2024, while others saw their CIR increase by 2.3 points. “This is the result of a careful reprioritization of domestic accounting hubs and subsequent acquisitions and divestitures,” the report explains.

It also expects more banks to expand into non-bank wealth management channels (independent managers and digital distribution).

In the consolidation of independent wealth managers (RIAs, IFAs, etc.), multiple arbitrage has historically driven most of the value creation, followed by cost synergies. However, attention is now shifting toward capturing revenue synergies driven by enhanced tools and increased investment in data and analytics. The report identifies that the next frontier for independent managers focused on UHNW clients (with $30 million or more in investable assets) is international expansion.

“Looking ahead, we expect most of the activity to come from cross-sector deals with insurance companies and asset managers that reassess whether they are the right owners of their asset management businesses and consider the possibility of pursuing mergers and acquisitions,” the report states among its main conclusions.