Find anything about our products, search our faqs, and more.
Type your query in the search above and press enter to see the results
Try typing "Card activation"
Choose your language
التغيير الى العربية English
OR
Apply online
Use UAE Pass to submit your application faster.
You must be more than 18 years old and have:
An active UAE mobile number
An Emirates ID
Your passport
Proof of income
A minimum salary of AED 5,000
Chief Investment Officer's team, 31.01.2022
Volatility continues to be the name of the game. To illustrate with stock markets, 3 out of the 5 largest intraday swings of the last decade happened in 2022. Last week was negative across asset classes: bonds were affected by rising interest rates and tightening spreads, while stocks were hit by risk aversion, even if Friday’s intraday reversal on US markets was positive.
The Fed’s FOMC meeting was a crucial moment. The US central bank confirmed three layers of tightening: an accelerated end to asset purchases, policy rate hikes, and a reduction of the balance-sheet. Over the weekend, in an interview with the FT, the Atlanta Fed Chief even said that he was not excluding the possibility of a 50 basis point hike in March, depending on the economic situation. This sounds quite extreme, but the consensus is now moving toward more than 4 hikes in 2022. It’s a serious change. A holistic and fast monetary tightening is actually as disruptive and as experimental as the holistic and fast deployment of support of the recent years. The impact on markets will depend essentially on how the economy deals with it.
Volatility should remain elevated in a busy week ahead, with quarterly earnings from big tech, key monthly economic data -from PMI to the US job report, policy committees from the ECB and BoE, and an OPEC+ meeting on oil output. We however note that between rising earnings and falling prices, equity multiples show a welcome improvement. It’s probably not totally irresistible yet, but as long as the economy keeps on growing and assuming that the Ukraine situation remain cold, the upside potential is only getting better.
We will share our detailed views on February 9th during our 2022 Global Outlook webinar. Stay safe.
Cross-asset Update
It is remarkable that US equities went through record losses in the first two weeks of 2022 as compared to the last ninety years in the same period, pointing to investors finally finding urgent reasons to want to dump overvalued assets, concerned about what could be coming next. It is the first time since the Covid crisis that multiples and profitability start to really matter, as the year-to-date dismal performance of the Goldman Sachs basket of non-profitable IT stocks proves. This change of heart is related to the large degree of tightening the Fed is minded to achieve to tame inflation pressures. And, since the tightening process is going to be long and winding, given the mammoth liquidity previously injected by the Fed in the system, it is reasonable to conclude that it will require time for equities to see new highs. For investors to regain visibility, we should get further into the withdrawal of liquidity. So, presumably we should first see the end of Quantitative Easing and the first rate hike, which would take us to March, and then get some insights into the shrinking of the Fed’s balance sheet, which would take us two more months down the road, before quite some uncertainty is lifted. In summary, volatility could well persist by and large for the first two quarters of the year. In the process, asset rotations as dictated by the shrinking liquidity pool are set to continue. The clear message from all of this is one and only: investors should be much more careful about what kind of risk they put in their portfolios.
A couple of examples may help better understand the full implications and guide the investment process. When liquidity was abundant, market participants were thrilled at the prospect of earnings or income streams, particularly if way above market-average, occurring even in a distant time in the future. This explains the meteoric rise of stocks tied to very innovative technologies, though loss-making in the shorter term, and explains the surge of the SPACs, special-purpose vehicles offering the promise of spectacular gains alongside limited visibility. It also accounted for spreads tightening even for the weaker credits, as long as the prospect for future growth was there. A shrinking liquidity pool should be reversing that logic, both in equities and credit. Profitability and visibility will come first, at the expense of what is more uncertain and related to a distant time horizon. So, expect the rotation from the most expensive pockets of growth equities into value to continue, and expect that the weaker and longer-duration credits are dumped, in favor of more solid and even somewhat lesser yielding ones. Call it the revenge of value and quality, or to an extent, of the old economy versus the new for now, if you wish, simply because in what is new and innovative there is simply a higher degree of risk.
Gold should offer another case in point. We still disagree with the viewpoint of some investment houses that are bullish on the yellow metal at the current levels. They disregard that across asset classes the tightening cycles of the 70s and the early 80s marked by higher inflation were more painful than the subsequent ones where inflation was much lower.
Fixed Income Update
The much anticipated January FOMC meeting is finally over. While the FOMC statement was benign, the post-meeting press conference set the cat among the pigeons. Chairman Powell’s answers in the Q&A session were more hawkish than anticipated. He never stepped aside from any probabilities regarding the amount or number of hikes. The Fed would be flexible rather than adopting the gradual pace of hikes that had happened in earlier cycles. As a result of such surprise, markets have started to price in 5 rate hikes, with some saying a 50-bps hike in March can’t be ruled out. On the quantitative tightening front, there would be a gradual reduction instead of any shock and awe measures that might be similar to what Janet Yellen had mentioned, akin to “watching paint dry” when she was the Fed chairperson. More important was that FOMC members agreed the Fed should essentially hold Treasuries as part of its assets which might translate to a faster run-off of its MBS book. That could negatively impact the spread of both the Agency and Non-Agency MBS. Moreover, Chairman Powell said they would have at least two more meetings to thrash out the details of the QT pace. It may be highly likely that the QT would begin in May or July of this year.
The 10-year Treasury yields were highly volatile last week, moving up by ten basis points on Wednesday and coming down by seven the next day. The treasury curve has flattened significantly as most of the impact was on the front-end rates, with markets still unsure about the long-term terminal growth rates. The Dec 2024 Euro-Dollar futures still indicate a peak rate of around 2%. Market participants are not confident that the Fed can achieve its terminal rate target of 2.5%. The upcoming March meeting would be a significant one, and Fixed Income markets could be very directionless in the meanwhile.
Credit spreads have been pretty stable except for developed market High Yield. While some risky asset classes are down between -7% to -10%, credit indices across the segments have been relatively stable, losing between -2% and -2.5%. This showcases the importance of asset allocation in investor portfolios and fixed income as an asset class even during a rising-rate environment. High yield spreads have widened by 50 basis points since the start of the year to reach 424 bps losing close to -2.63% compared to -2.93% for Investment Grade credit that has a longer duration. EM Debt has been relatively stable, with spreads widening only by 19 bps since the start of the year. As liquidity is removed from the market, the expensive segments and spreads will mean revert, allowing investors to dip their feet into the asset class.
MENA primary issuance has been taking a hiatus due to the volatility forcing issuers to put off their bond sales. The latest issuer to announce a mandate is ADNOC (Aa2/AA/AAA), which held investor calls last week. This will be an inaugural issuance for the company, and we expect the pricing to be in line with the Abu Dhabi Sovereign curve with 10-20 bps of new issue premium.
Equity Update
Global equities fell a percent last week and year to date are down 6.5%. Though negative year to date and a rough week, EM equities are outperforming DM and vindicating our small EM overweight positioning. The U.S. markets managed a strong Friday close and ended the week positively, after 3 weeks of losses. The S&P 500 was up 0.8% while the Nasdaq flat. Intraday volatility remains high with the Nasdaq in correction territory and the S&P 500 skirting dangerously close. The main driver is a potentially more aggressive Fed tightening campaign than expected. The Nasdaq could possibly have its worst month since the 2008 financial crisis. European equities continued into a fourth week of losses. Weighing on Europe are Russia Ukraine tensions and the possible impact on gas supplies. EM equities fell last week with both China and India falling. The UAE was an exception gaining 2%. Global sectors continued in the same pattern as the first three weeks of January and energy continues to lead sector returns.
The path toward monetary policy normalization will be bumpy, hence demand and growth indicators remain important. In the near term, policy decisions and market expectations will be dependent on both economic and inflation data. Inflation seems to be the centre of market movements, hence our focus on corporate margins and selectivity.
Approximately one third of the S&P 500 companies have reported Q4 earnings; revenue growth is on track to grow +16 % y/y and earnings 30%. A very active week on the U.S. earning front with Apple, Tesla and Microsoft’s record results a standout, along with payment processor Visa. Apple product revenues were over $100 bn with the iPhone, Mac, and wearables growing market share notably and in China while iPad revenues disappointed. Gross margin at 43.8% is noteworthy. Visa payments volumes were up 20% y/y with growth in eCommerce and return to cross-border travel. Key in guidance across industries was the shortfall in semi-conductor supply. The global chip shortage has been caused by increasing automation and intensified by US sanctions on suppliers from China. The US remains reliant on overseas chipmakers such as TSMC. Chip inventories held by manufacturers have fallen to an average of just five days’ supply, down from 40 days in 2019. Mixed reactions from the market, but in line with valuation concerns as Apple and Microsoft gained but Tesla fell post earnings announcements. Caterpillar warned about Q1 margin pressure from supply and labor constraints.
Whilst above trend valuations remain worrying, with the higher rate environment the derating has already begun and the S&P 500 forward price to earning is at 20.1X at the 5 year average level and the European equity multiple is much lower at 14.5X. We expect volatility to continue into a tightening cycle but would add to quality names. Focus on strong businesses at valuations in the median of their sector and margins which will be not overly affected by inflation – both cost of raw materials and wages. No corporate is inflation proof but a good hedge against inflation are dividend paying companies with cash flows strong enough to raise dividends and energy producers.
Written By:
Maurice Gravier Chief Investment Officer, [email protected]Emirates NBD Bank PJSC (“Emirates NBD”) is licensed and regulated by the UAE Central Bank and this website aims at providing Internet users with information concerning Emirates NBD Private Banking, its products and activities. Persons having access to information made available by Emirates NBD on this website accept the following rules:
Reliance:
Emirates NBD uses reasonable efforts to obtain information from sources which it believes to be reliable, however Emirates NBD makes no representation that the information or opinions contained in publications on this website are accurate, reliable or complete. Published information may include data/information from stock exchanges and other sources from around the world and Emirates NBD does not guarantee the sequence, accuracy, completeness, or timeliness of information contained on this website provided thereto by unaffiliated third parties. Anyone proposing to rely on or use the information contained on this website should independently verify and check the accuracy, completeness, reliability and suitability of the information and should obtain independent and specific advice from appropriate professionals or experts. Further, references to any financial instrument or investment product are not intended to imply that an actual trading market exists for such instrument or product. Emirates NBD is not acting in the capacity of a fiduciary or financial advisor. Any publications on this website are provided for informational purposes only and are not intended for trading purposes. Data/information provided herein is intended to serve for illustrative purposes and is not designed to initiate or conclude any transaction. The information available on this website is not intended for use by, or distribution to, any person or entity in any jurisdiction or country where such use or distribution would be contrary to law or regulation. This website and anything contained herein, is provided "as is" and "as available," and that Emirates NBD makes no warranty of any kind, express or implied, as to this website, including, but not limited to, merchantability, non-infringement, title, or fitness for a particular purpose or use.
Modifications:
The provision of certain data/information on this website is subject to the terms and conditions of other agreements to which Emirates NBD is a party. Emirates NBD reserves the right to make changes and additions to the information provided at any time without prior notice. The information may be modified or removed without prior notice. No buy or sell orders submitted via the internet or email will be accepted. In addition, the data/information contained on this website is prepared as of a particular date and time and will not reflect subsequent changes in the market or changes in any other factors relevant to the determination of whether a particular investment activity is advisable.
Liability:
Information contained on this website is believed by Emirates NBD to be accurate and true, in all material respects. Emirates NBD accepts no responsibility whatsoever for any loss or damage caused by any act or omission taken as a result of the information contained on this website. Further Emirates NBD accepts no liability for the information and opinions published on the website and is under no obligation to remove outdated information from its website or to mark it clearly as such. The information given on this website may not be distributed or forwarded in whole or in part. Accordingly, anything to the contrary herein set forth notwithstanding, Emirates NBD, its suppliers, agents, directors, officers, employees, representatives, successors, assigns, affiliates or subsidiaries shall not, directly or indirectly, be liable, in any way, to you or any other person for any: (a) inaccuracies or errors in or omissions from the information available on this website including, but not limited to, quotes and financial data; or (b) loss or damage arising from the use of this publication, including, but not limited to any investment decision occasioned thereby. or (c) under no circumstances, including but not limited to negligence, shall Emirates NBD, its suppliers, agents, directors, officers, employees, representatives, successors, assigns, affiliates or subsidiaries be liable to you for direct, indirect, incidental, consequential, special, punitive, or exemplary damages even if Emirates NBD has been advised specifically of the possibility of such damages, arising from the use of the information on this website, including but not limited to, loss of revenue, opportunity, or anticipated profits or lost business. Emirates NBD expressly accepts no liability for losses or damages of any kind arising from using or accessing this website or links to third-party websites or from viewing information on any of its web pages. Furthermore, Emirates NBD accepts no liability for any unauthorized manipulation of users IT systems. Emirates NBD expressly draws user’s attention to the risk of viruses and the threat of hacker attacks
Third Party Website:
Users may be aware that Emirates NBD has no control whatsoever over third-party websites linked to or from this website and therefore accepts no liability for the content of such websites being correct, complete and legally valid for the products and services offered on such websites. Emirates NBD’s express written permission must always be sought before including a link to this website on a third-party website.
Solicitation:
None of the information on this website in any way constitutes a solicitation, offer, opinion, or recommendation by Emirates NBD to buy or sell any security, or to provide legal, tax, accounting, or investment advice or services regarding the profitability or suitability of any security or investment.
Forward Looking:
The information contained on this website does not purport to contain all matters relevant to any particular investment or financial instrument and all statements as to future matters are not guaranteed to be accurate. Certain matters in this publication on the website are about the future performance of Emirates NBD or members of its group (the Group), including without limitation, future revenues, earnings, strategies, prospects and all other statements that are not purely historical, constitute “forward-looking statements”. Such forward-looking statements are based on current expectations or beliefs, as well as assumptions about future events, made from information currently available. Forward-looking statements often use words such as “anticipate”, “target”, “expect”, “estimate”, “intend”, “plan”, “goal”, “seek”, “believe”, “will”, “may”, “should”, “would”, “could” or other words of similar meaning. Undue reliance should not be placed on any such statements in making an investment decision, as forward-looking statements, by their nature, are subject to known and unknown risks and uncertainties that could cause actual results, as well as the Group’s plans and objectives, to differ materially from those expressed or implied in the forward-looking statements. Past performance is not necessarily a guide to future performance. Estimates of future performance are based on assumptions that may not be realized.
Risk: In addition, before entering into any transaction, the risks should be fully understood and a determination made as to whether a transaction is appropriate given the person’s investment objectives, financial and operational resources, experiences and other relevant circumstances. The obligations relating to a particular transaction (and contractual relationship) including, without limitation, the nature and extent of their exposure to risk should be known as well as any regulatory requirements and restrictions applicable thereto. Data included on this website may rely on models that do not reflect or take into account all potentially significant factors such as market risk, liquidity risk, and credit risk. Emirates NBD may use different models, make valuation adjustments, or use different methodologies when determining prices at which Emirates NBD is willing to trade financial instruments and/or when valuing its own inventory positions for its books and records.
Investment in financial instruments involves risks and returns may vary. Before making such an investment, investors should consult their advisers on the legal, regulatory, tax, business, investment, financial and accounting implications of the investment.
Intellectual property:
The information on this website has been developed, compiled, prepared, revised, selected, and arranged by Emirates NBD and others (including certain other information sources) through the application of methods and standards of judgment developed and applied through the expenditure of substantial time, effort, and money and constitutes valuable intellectual property of Emirates NBD and all present and future rights in and to trade secrets, patents, copyrights, trademarks, service marks, know-how, and other proprietary rights of any type under the laws of any governmental authority, domestic or foreign, shall at all times be and remain the sole and exclusive property of Emirates NBD and/or other lawful parties and you acknowledge that you have no ownership rights in and to any of such items. Except as specifically permitted in writing, the information provided in this website shall not be copied or make any use of any information on this website or any portion of the intellectual property rights connected with this website, or the names of any individual participant in, or contributor to, the content of this website, or any variations or derivatives thereof, for any purpose. Further you shall not use any of the trademarks, trade names, service marks, copyrights, or logos of Emirates NBD or its subsidiaries in any manner which creates the impression that such items belong to or are associated with you or, except as otherwise provided with Emirates NBD’s prior written consent,
Confidentiality:
The information on this website solely for non-commercial use and benefit and the use of this information is not intended for resale or other transfer or disposition to, or use by or for the benefit of, any other person or entity. Information contained in this website shall not be used, transferred, distributed, reproduced, published, displayed, modified, create derivative works from any data contained on this website or disposed of in any manner that could compete with the business interests of Emirates NBD. Any part of this website may not be offered for sale or distribute it over any medium including but not limited to over-the-air television or radio broadcast, a computer network or hyperlink framing on the internet without the prior written consent of Emirates NBD. The information contained on this website may not be used to construct a database of any kind. The data on this website shall not be used in any way to improve the quality of any data sold or contributed by you to any third party.
Recipient Acknowledgements
In accessing this website, you acknowledge and agree that there are risks associated with investment activities. Moreover, you agree that your use of this publication is at your sole risk and acknowledge that the responsibility to obtain and carefully read and understand the content of documents relating to any investment activity described on this website and to seek separate, independent financial advice if required to assess whether a particular investment activity described herein is suitable, lies exclusively with you.
Emirates NBD Bank (P.J.S.C.) is licensed by the Securities & Commodities Authority and subject to regulation, supervision and control of the Authority.
Head Office : Baniyas Road, Deira, PO Box 777, Dubai, UAE
Low visibility ahead, confirmed
24.01.2022
A year of low visibility ahead
10.01.2022
Healthy, Happy, Prosperous 2022
03.01.2022
Heated by the sunshine of a vibrant recovery, the magic liquidity is evaporating, and turning into fog for investors. While growth remains robust, markets may not be ready for the new uncertainties around central banks, inflation and interest rates, to name a few. We are getting prepared to navigate tactically, in a year of ‘low visibility ahead’.
Know MoreHow was your website experience today?
Subscribe and stay updated!
Get exclusive deals, latest promotions and important information
All this and more in the Emirates NBD newsletter
You are leaving the Emirates NBD Website
You will now be redirected to an external website to view this content. Emirates NBD or any of its subsidiaries does not bear liability/responsibility for any other information published by the website owner or publisher.
You will be redirected in 5 Seconds