By David Harris, head of sustainable business, LSEG

It was Rahm Emanuel, President Barack Obama’s chief of staff, who argued in the aftermath of the last great period of market turmoil in 2008 that “you never want a serious crisis to go to waste.”

As policy makers and financial institutions around the world make dramatic and costly moves to address the current crisis, many are also taking aim at the crises of the future. 

As the market turmoil caused by the COVID-19 pandemic necessitates institutional investors to review their asset allocations and mandates over the coming months, we expect them to embrace invention, in the form of climate and sustainability-tilted smart beta strategies, or what we refer to as Smart Sustainability. This is set to accelerate the already explosive growth of sustainable investing. 

Smart beta strategies offer investors a low-cost means of taking a view on factors they believe will generate outperformance over...

FTSE Russell recently hosted market and derivatives experts from FTSE Russell, Jefferies, CME Group and Cboe Global Markets in a special webinar focused on US small cap equity market volatility amid the global pandemic. In the webinar for clients and the news media, moderated by Sean Smith, managing director of index derivatives licensing, FTSE Russell, the group shared perspective on the current state of the US small cap equity market and US small cap index derivative tools and approaches to address opportunities and manage downside risk.

Steven DeSanctis, US small & mid cap equity strategist, Jefferies:

“It's been three steps up, one step back for US small caps this year, but looking a historical experience small caps have traditionally outperformed, coming out of recession and economic downtowns. Three key positive indicators to watch for this asset class include narrowing high yield spreads, change in investor sentiment toward US small caps and...

Sustainability-focused funds have continued on an upward trajectory in 2020, despite a volatile first quarter.

Morningstar research reveals that 24 of 26 environmental, social and governance (ESG)-tilted index funds outperformed their closest conventional counterparts in the first three months of the year.

One in seven of these new sustainable investment funds launched in 2019 had a specific climate-oriented mandate according to Morningstar. Globally, investments in ETFs tracking ESG indices more than doubled, going from $22.1 billion in 2018 to $56.8 billion by the end of 2019, estimates S&P Dow Jones Indices.

By Robin Marshall, director, fixed income research

Financial conditions have barely eased in the Eurozone and Japan…

The ECB and Bank of Japan have pursued broader-based and upgraded QE programs since the Covid-19 shock. These are variations on "conventional QE" schemes, supplementing government bond purchases with expanded purchases of corporate bonds and easing collateral requirements to include bonds that were "fallen angels" on April 7 (ECB). The BoJ has also doubled the target for its equity ETF purchases and trebled the target for corporate bond and commercial paper purchases, to JPY 20 trillion.

The ECB's initial success in narrowing Eurozone credit spreads might have been expected to ease financial conditions in the Eurozone (see Lesson of the credit-market rally: don't fight the Fed). But despite broader QE, financial conditions have barely eased in the Eurozone and Japan during the last three months, as the chart below shows (based on the FTSE...

By Robin Marshall, director, fixed income research

Financial conditions have barely eased in the Eurozone and Japan…

The ECB and Bank of Japan have pursued broader-based and upgraded QE programs since the Covid-19 shock. These are variations on "conventional QE" schemes, supplementing government bond purchases with expanded purchases of corporate bonds and easing collateral requirements to include bonds that were "fallen angels" on April 7 (ECB). The BoJ has also doubled the target for its equity ETF purchases and trebled the target for corporate bond and commercial paper purchases, to JPY 20 trillion.

The ECB's initial success in narrowing Eurozone credit spreads might have been expected to ease financial conditions in the Eurozone (see Lesson of the credit-market rally: don't fight the Fed). But despite broader QE, financial conditions have barely eased in the Eurozone and Japan during the last three months, as the chart below shows (based on the FTSE...

By Robin Marshall, director, Global Markets Research Fixed Income

Following the extreme stress in March, corporate credit markets rode a resurgence in risk appetite in April amid unprecedented central-bank support – in particular Fed and European Central bank plans to extend QE programs to lower-grade debt – and the start of a gradual easing of lockdowns in many countries.

As part of its $2.3-trillion rescue package, the Fed announced on April 9 that it would expand an existing facility to include purchases of ‘fallen angels’, or issuers recently downgraded to high-yield status from triple B minus ratings or above on March 22. Later in April, the ECB relaxed collateral rules for refinancing ‘fallen angel’ bonds through September 21, while also signaling willingness to add purchases of this riskier debt as part of its €2.8 trillion pandemic rescue program launched in late March.

As the chart below shows, US and Eurozone corporate bond returns rose...

The S&P 500 and Dow Jones Industrial Average edged lower in a choppy trading session Wednesday, as investors continued to try to untangle data and corporate earnings to determine what the economy might look like in the months ahead.

After opening modestly higher, the indexes flitted between small gains and losses throughout most of the day. The declines accelerated in the final hour of the session.

The...

By Philip Lawlor, managing director, Global Markets Research

Like equities broadly, alternative indexes—those that concentrate on a rules-based selections of stocks in areas such as real estate or environmental, social and governance (ESG)—staged a strong rebound in April from March lows. Here, we take a closer look at the recent performances of a handful of FTSE alternative indexes.

First, let’s examine the Environmental Opportunities (EO) series—which tracks the performances of companies engaged in environmental activities, including renewable energy, energy efficiency and waste and pollution control. Amid widespread gains, the US strongly outpaced its country-specific peers, particularly in Japan, and all other categories except the Energy Efficiency index in April. Losses for the year remain in the mid to high teens across the board.

FTSE Environmental Opportunities index series

Source: FTSE Russell. Data as of April 30, 2020. Past...

By Philip Lawlor, managing director, Global Markets Research

Global equities posted the strongest monthly gains in years (if not decades) in April, recouping much of their pandemic-driven losses since late February. Markets rode hopes that sustained central-bank liquidity support and moves to end lockdowns in many countries could soon help kick-start economic activity – even as incoming data grew increasingly grimmer.

US stocks led the April relief rally: the Russell 1000 rose 13.2% for the month, and the US small cap Russell 2000 did even better, rising 13.7%. Both were well ahead of developed-market peers and the FTSE All-World ex US, which gained 7.7% for the month. The year-to-date COVID-19 toll has been far less severe for US stocks than for equity markets elsewhere.

Global equity total returns – April and YTD 2020 (local currency, %)

Source: FTSE Russell. Data as of April 30, 2020. Past performance is no guarantee to future results....

By Philip Lawlor, managing director, Global Markets Research

Global equities posted the strongest monthly gains in years (if not decades) in April, recouping much of their pandemic-driven losses since late February. Markets rode hopes that sustained central-bank liquidity support and moves to end lockdowns in many countries could soon help kick-start economic activity – even as incoming data grew increasingly grimmer.

US stocks led the April relief rally: the Russell 1000 rose 13.2% for the month, and the US small cap Russell 2000 did even better, rising 13.7%. Both were well ahead of developed-market peers and the FTSE All-World ex US, which gained 7.7% for the month. The year-to-date COVID-19 toll has been far less severe for US stocks than for equity markets elsewhere.

Global equity total returns – April and YTD 2020 (local currency, %)

Source: FTSE Russell. Data as of April 30, 2020. Past performance is no guarantee to future results....

By Philip Lawlor, managing director, Global Markets Research

As attention starts to shift towards when and how the lockdown exit will be implemented, there are a litany of important questions and themes that needs to be considered in a post-lockdown world. In this blog, we pose ten questions, which are top of mind for market participants.

1. From a macroeconomic perspective, the most fundamental question is what will be the long-term economic impact from Covid-19 on growth?

Looking at the long-term historical trend, the moving average of US nominal GDP and bond yields over a fifty-period shows that the US, like many other economies, have encountered four major economic regimes: In the 1970s, the US economy experienced a period of significant inflation; then followed a period of so-called Great Moderation under Paul Volcker, which stripped inflation out of the system; then encountered 10-year of Goldilocks under Alan Greenspan, with nominal GDP averaging...

Join FTSE Russell fixed income expert Robin Marshall for a 30-minute webinar to discover key observations from our Market Maps "Fixed Income Insight" report published in May.

Specifically, Robin will discuss fixed income market performance and macro-economic drivers, across conventional, inflation-linked, corporate and MBS indexes, framing his analysis within the context of the COVID-19 crisis.

Register for a webinar in your region.