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Investors should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. Past performance does not guarantee future performance.
THIS MONTH’S NEWSLETTER:
In this issue we dive into the Newday Ocean Health Campaign, working alongside key stakeholders to address critical issues including the reduction of krill in aquaculture. We’ve also just released our updated Ocean Health ETF (AHOY), with an increased focus on companies making significant impacts on the health of our oceans. We also take a look at the markets and global events as we start 2024.
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IMPACT COMMENTARY
Newday Ocean Health Campaign kicks into high gear
Over the past month, we’ve been pushing forward our work supporting ocean health and coastal resilience, building on the momentum from COP28, where CEO Doug Heske and head of comms Dan Keeler participated in several events focused on nature-positive solutions for the challenges our planet faces.
As well as continuing to expand our stable of impact partners focused on ocean health and coastal restoration, we’re ramping up work on the EarthEcho-Newday Krill-Free Forever campaign. Through the first quarter of this year we’ll be working closely with The Lexicon for Sustainability to build an activator that will bring together a diverse range of experts, activists and corporations who will ensure the campaign achieves maximum impact in the minimum time.
In May, we’ll be participating in the Future of Fish Feed conference, which brings together industry leaders to devise a strategy to permanently cut the use of krill in aquaculture. More details and a link to request invitation to the event are below.
And this month’s biggest news? As part of our commitment to deepening the impact of our portfolios, we refined the constituents of our Healthy Oceans ETF—ticker symbol AHOY—to include more companies that are specifically focused on restoring or supporting the health of our oceans. The enhancements further set AHOY apart from other ocean-focused investments and reflect our relentless focus on impact. Please visit our ETF site (https://www.newdayimpactetfs.com/) to add AHOY to your portfolio.
In the coming months we’ll share more details about the impact of the AHOY portfolio, as well as our advocacy work both through the ETF and through our impact partnerships. Stay tuned!
Save the Date: Future of Fish Feed (F3) gathering in San Francisco, 14-16 May 2024
The Future of Fish Feed (F3) team is excited to announce the dates of our Krill Replacement F3 meeting! Since our last in-person event 5 years ago, the costs (economic, ecological and social) of hunting and gathering forage fish for fish meal and fish oil have continued to increase. The proliferation of alternative ingredients with increasing investments are a truly disrupting technology that in a short time will vastly improve the sustainability of aquaculture.
This meeting will center on krill replacements — which is the focus of the current F3 Challenge — and will also feature the latest industry advances in fishmeal and fish oil replacements that are shaping the future of fish feed. While we cannot predict which of the technologies or companies will end up being the industry leaders in the future, we are confident that these innovators will be present at this meeting.
This 2024 F3 Meeting promises to be a one-of-a-kind opportunity for industry leaders to collaborate, share expertise and explore solutions for both environmental conservation and to ensure greater feed, farm and food security.
Date: May 14-16, 2024
Location: San Francisco Airport Waterfront Marriott
Access: Exclusive invite-only
Highlights include:
- Panels on scaling-up, financing and sustainability
- Meet the F3 Krill Replacement Challenge participants (contestants?)
- Alternative Ingredients Fair
- San Francisco sightseeing & dining on delicious F3 seafood
Formal invitations and a detailed agenda will follow soon. If you’d like to join this gathering of innovators who are moving aquafeed forward, please contact emma@anthinst.org for an invitation.
JANUARY GLOBAL EQUITY COMMENTARY
Written by: Newday Investment Team
Equity and bond markets continued to rally in unison through year-end, with the S&P 500 posting over an 11% return for the quarter, more than reversing the 3.3% decline in Q3.[1] Headline inflation in the US remains in a reasonable range, albeit above the Fed’s 2% target, underpinned by sticky core inflation and wage growth of around 4%, partially offset by producer price inflation of only 1%.[2] As in the prior month, all sectors rallied aside from energy, which fell with oil prices.[3] Equity volatility continued to decline as market participants appeared sanguine about macro concerns, with cross-asset vol moving back towards the low end of the pre-COVID range.[4] Expectations for sharp Fed rate cuts were ratcheted up in December given the increasingly benign global inflation outlook. As of late-January, the Fed Funds futures market is pricing in about 60bps of rate cuts through mid-2024 and nearly 150bps by the end of 2024.[5] That contrasts with a Fed forecast of three rate cuts in 2024.[6]
PMIs indicated a modestly improving global outlook in contrast with the stagnant picture from prior months, driven mainly by better sentiment in the US. PMIs in the US rose sharply in January while the Eurozone and China remained weak.[7] US nonfarm payrolls and wage growth continue in the 200,000/4% range and new unemployment claims have been stable at a relatively low level.[8] The U-6 unemployment rate – which includes people who want to work but have given up searching and those people working part-time because they can’t find full-time employment – has been stable around 7% since mid-2023.[9] The data appears to indicate a healthy labor market that is neither overheating nor foreshadowing signs of a recession.
While US inflation data appears stable, Eurostat data showed that core inflation in the Eurozone continues to decline, decelerating to 3.4% YoY in December.[10] China remains in outright deflation, with headline consumer prices flat or declining YoY in six out of the last seven months and core inflation stuck at just 0.6% YoY.[11] The US dollar declined again in December although started to rebound in January on the stronger US outlook, contrasting with the weaker outlook elsewhere as the PBoC reduced bank reserve requirements and the ECB signaled potential rate cuts by the summer.[12]
Despite the relatively weak non-US PMI outlook, many economists expect the global economy to achieve a soft landing.[13] The US yield curve continues to be inverted although has steepened considerably since mid-2023 with the spread between 2-year and 10-year Treasurys at -0.19%, up from a low of -1.08% in July.[14] We believe the de-inversion of the yield curve indicates improving growth sentiment in light of the benign inflation environment and the expectation for a shift to less restrictive monetary policy by central banks.
We continue to believe inflation is unlikely to accelerate meaningfully from here although further downward pressure on commodities and tradeable goods prices may be required to push inflation significantly lower given continued underlying positive trends in core inflation and wage growth that seem unlikely to abate. After a volatile Q3 in markets, we saw a “Santa Claus rally” morph into a “January effect” rally over the last few weeks.[15] The most important factor in risk appetite remains the inflation outlook relative to central bank expectations, which we believe should remain broadly under control and in a reasonable range, implying only modest downside to markets absent a significant negative geopolitical event. The US Presidential election is a key macro event that may bias Fed policy away from hawkishness this year and also serve as an important thematic driver in the markets as debates around key policy areas come into focus over the next nine months.
Kicking off 2024, one of our major endeavors was to transition our ocean health ETF (NYSE: AHOY) to a more concentrated and focused portfolio of holdings. In January, we repositioned the portfolio by consolidating it down to 25 names spanning five core themes: water quality and technology, clean energy, sustainable fishing, environmental engineering and rehabilitation, and responsible retailing of consumer products. We intend to engage with the companies in the portfolio to promote environmental stewardship, support innovation that contributes to ocean health, and advocate for corporate policies that reduce negative externalities impacting our oceans. The new strategy is not only more concentrated with a focus on direct ocean impact by portfolio constituents, it is also more global and more oriented towards small and midcap companies that are unique and differentiated. These names not only have the potential to generate a significant positive impact on ocean health, we also believe that each name in the portfolio has a strong investment case based on our rigorous and holistic quantamental process. Aside from our ocean health ETF, we continue to refine our other strategies by making opportunistic swaps and adding new names that are thematically relevant and targeted at maximizing portfolio impact.
Footnotes:
[1] See below data table, also https://www.joelisaacson.com/2023-q3-market-recap/
[2] See https://tradingeconomics.com/united-states/inflation-cpi, https://tradingeconomics.com/united-states/core-inflation-rate, https://tradingeconomics.com/united-states/average-hourly-earnings-yoy, https://tradingeconomics.com/united-states/producer-prices-change
[3] See below tables providing S&P 500 sector and commodity performance data.
[4] See https://tradingeconomics.com/vix:ind
[5] See https://www.cmegroup.com/markets/interest-rates/stirs/30-day-federal-fund.quotes.html#venue=globex
[6] See https://www.investors.com/news/economy/federal-reserve-tees-up-three-rate-cuts-for-2024-sp-500/
[7] See https://tradingeconomics.com/china/nbs-general-pmi, https://tradingeconomics.com/euro-area/composite-pmi
[8] See https://tradingeconomics.com/united-states/non-farm-payrolls, https://tradingeconomics.com/united-states/average-hourly-earnings-yoy, https://tradingeconomics.com/united-states/non-farm-payrolls, https://tradingeconomics.com/united-states/average-hourly-earnings-yoy, https://tradingeconomics.com/united-states/jobless-claims-4-week-average, https://tradingeconomics.com/united-states/continuing-jobless-claims
[9] See https://tradingeconomics.com/united-states/u6-unemployment-rate
[10] See https://tradingeconomics.com/euro-area/core-inflation-rate, https://tradingeconomics.com/euro-area/inflation-cpi
[11] See https://tradingeconomics.com/china/inflation-cpi, https://tradingeconomics.com/china/core-inflation-rate
[12] See https://tradingeconomics.com/united-states/currency, https://www.euronews.com/business/2024/01/17/davos-2024-ecb-president-lagarde-hints-at-potential-rate-cuts-by-the-summer, https://finance.yahoo.com/news/pboc-cut-rrr-banks-early-074318205.html
[14] See https://fred.stlouisfed.org/series/T10Y2Y
[15] See https://www.nasdaq.com/articles/unveiling-a-bullish-seasonal-pattern%3A-can-it-save-the-stock-market
COUNTRY GOVERNANCE RESEARCH COMMENTARY
Israel’s war with Hamas enters its fourth month
Israel’s campaign to eliminate Hamas has entered its fourth month amidst ongoing international calls for a ceasefire. Under pressure from the United States, Israel has said it is reducing the intensity of its military operations, which have laid waste to large portions of the Gaza Strip and have displaced around 85% of the population. Despite the overwhelming force deployed, there are reports that that Israel is falling short of its stated aim of eradicating Hamas’s political and military capabilities. Complicating the fight is the fact that Hamas’s tunnel network has been found to be far more extensive than previous estimates. There are also growing debates within Israel as to whether securing the return of hostages should take precedence, even if that comes at the expense of the battle against Hamas. Recently, Qatar, Egypt, and the US have been negotiating with Israel to secure a longer truce as part of a phased hostage-prisoner exchange agreement. The main sticking point in the talks has been the duration of any cessation in hostilities. Hamas has called for a permanent ceasefire, which Israel has said it would reject as long as Hamas remained in control of Gaza. There are also disputes about what happens after the war ends. Netanyahu has rejected calls for renewed efforts towards a two-state solution once the fighting stops.
Implications: While the war between Israel and Hamas rages, tit-for-tat attacks throughout the region have underscored worries that the fighting could escalate into a broader regional conflict. Most significantly, attacks on ships transiting the Red Sea by Iran-backed Houthi rebels in Yemen have led to multiple rounds of air-strikes by the US and UK militaries.
Ukraine’s defense complicated by doubts over Western support
As the second anniversary of Russia’s full-scale invasion approaches, Western leaders have continued to struggle to secure stalled aid packages for Ukraine. In the United States negotiations over stricter border policies have been progressing in the Senate. Republicans have insisted on new measures to stem the record flow of asylum seekers crossing the southern border in exchange for their support for additional aid to Ukraine. However, with negotiators nearing completion of their legislative proposal, opposition to the deal by Donald Trump, the likely Republican presidential nominee, risks scuttling the entire endeavor. The Europeans for their part have had their own difficulties passing new aid for Ukraine because of opposition from Hungarian Prime Minister Viktor Orban. However, EU officials have expressed confidence that they would find a way to pass their aid package at an upcoming summit with or without Hungary’s support. There have also been discussions about seizing frozen Russian central bank assets to fund Ukraine. The Senate Foreign Relations Committee recently passed such a measure, but European officials, where the majority of Russian assets are held, have been more circumspect about the unprecedented move. In addition, the Europeans have recently stepped up their bilateral military support for Ukraine, though they could not completely replace the loss of continued US funding.
Implications: So far, the delays in aid have not led to dramatic changes on the battlefield, but ammunition shortages are being felt and Ukrainians are facing grueling combat to hold-off relentless Russian assaults. It would be a tragedy if Ukraine’s defense were to falter due to a lack a Western resolve, and Russia were to be seen as having had more dependable allies in China, Iran, and North Korea than Ukraine had in the West.
FROM OUR SOCIAL
A ‘digital handshake’ for the planet: How one asset management firm adopted a new framework for ESG
‘When [climate scientist Nerilie] Abram was here a decade ago there was a mass of ice floating off the coast. It’s a vastly altered scene when she looks out the window now. “There’s no sea ice at all,” she says. “It’s a magnificent landscape. To think about what we’re doing to it and the changes that are happening here, it’s a punch in the guts.”’
We can do more to protect our climate and ocean, and investing in the right industries and initiatives is critical. The time is now.