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IMPACT COMMENTARY
Celebrating Asian Americans and Advancing Leaders Through Opportunity
As we celebrate Asian American and Pacific Islander (AAPI) Heritage Month and recognize the accomplishments, contributions, and diverse cultures and traditions this ethnic group has brought to the United States, it is important to understand why the Federal Asian Pacific American Council (FAPAC) chose “Advancing Leaders Through Opportunity” as this year’s theme. Diversity and inclusion in the business world have gained significant traction over the years, but there is still a considerable lack of Asian representation at the executive level, particularly among Asian American women.
Asian Americans are the fastest-growing and most diverse racial group in the United States, with approximately 50 ethnic groups speaking more than 100 languages, according to the most recent census data. According to the report ASIANOMICS IN AMERICA by Goldman Sachs Research, Asian Americans are the most educated population in the United States, with 69% of those aged 25–54 holding bachelor’s degrees, compared to 41% of white Americans. Asian Americans are also twice as likely to have graduate degrees. In addition, Asian Americans account for 13% of STEM positions and 19% of high-impact patents. Since 1980, one out of ten Nobel Prizes in physics and chemistry have been awarded to Asian Americans, and they are overrepresented in rapidly expanding industries such as information, corporate management, and professional technical services.
In addition, they have collectively made substantial contributions to the U.S. economy. According to the New American Economy Research Fund, AAPI households accounted for nearly a quarter of US employment growth from 2003 to 2019. This drove approximately 23% of private-sector output growth over the same time period and contributed $1.5 trillion to the growth of the economy. However, the Asian-American experience varies substantially by occupation and country of origin, as seen in the chart below. In general, Asian Americans from India and China have considerably higher education and income levels than their counterparts from Pakistan, Vietnam, and Cambodia.
Despite their individual and collective economic achievements, they continue to face numerous obstacles in their professional lives, particularly when it comes to breaking the so-called “bamboo ceiling,” a term coined by author Jane Hyun in 2005 to describe the obstacles Asian Americans face in ascending to the highest levels of corporate America. The chart shows that Asian Americans comprise 13% of professional positions at significant employers but only 6% of senior management positions. Even in high-paying professions (those with a median annual wage of more than $100,000), Asian Americans make $0.93 for every dollar their white coworkers make, according to the 2019 American Community Survey by the U.S. Census Bureau. This persistent disparity in compensation contradicts the notion that Asian Americans are all doing well and excelling in all fields, as the difference in compensation is associated with the underrepresentation of Asian Americans in higher-paying managerial positions.
Even after adjusting for age, according to Goldman Sachs Research, Asian Americans born in the United States are 15% less likely to hold executive positions than Caucasian men with the same educational credentials. In addition, Asian Americans’ share of CEO positions in the S&P 500 Index of significant U.S. companies has been stagnant at approximately 2% for the past decade. These obstacles are amplified for Asian-American women, who must also contend with ethnic and gender biases. The lack of role models and mentors is especially problematic for Asian-American women. With only 1 in 285 Asian women in executive positions, they have very few role models to look up to. In the absence of visible role models, it becomes increasingly difficult for Asian women and men to acquire the resources necessary for advancement into management positions. According to a DEI report by McKinsey, despite the fact that Asian Americans are highly represented in corporate jobs, their presence declines considerably at the board of directors’ level, with Asian American women experiencing an even steeper decline of 80%. Due to the intersectionality of race and gender, Asian-American women encounter unique career challenges. According to research, Asian women receive one promotion for every two Asian men at the senior manager level and one promotion for every six Asian men at the C-suite executive level.
Despite the challenges faced by Asian Americans in the workplace, some have managed to rise through the ranks and become CEOs of Fortune 500 companies. Among the Fortune 500 companies in 2022, only 23 of the CEOs were of Asian American descent. Unfortunately, Asian women are half as likely as white women to be executives, on par with Black and Hispanic women, with none of the CEOs of S&P 100 companies and only four of the CEOs of Fortune 500 companies being Asian women.
Asian Pacific American Heritage Month is a crucial reminder of the importance of diversity, equity, and inclusion in the business world. While progress has been made, much work remains to ensure that qualified Asian Americans and Asian American women can break through the bamboo ceiling and reach their maximum leadership potential. Companies can advance leaders through new opportunities by addressing systemic inequities, instituting sponsorship and mentorship programs, investing in professional development, and diversifying the image of leadership.
Join us at Newday by celebrating Asian American and Pacific Islander Heritage Month and doing our part to break down barriers and create opportunities to build new leaders and help advance innovation, close disparities and drive progress for ALL!
MAY GLOBAL EQUITY COMMENTARY
Written by: Newday Investment Team
In our opinion risk assets continued to trade reasonably well in April as bonds and stocks rallied together amidst a relatively benign macro backdrop. We believe Fed actions quelled some of the broader concerns around bank deposits and on May 1st, JP Morgan (NYSE: JPM) announced its acquisition of troubled bank First Republic (NYSE: FRC). The VIX declined from 18.7 at the end of March to 15.8 at the end of April, the lowest level since February 2020.[1]
Growth expectations continued to improve with April PMIs rising for most economies. The JP Morgan global composite PMI rose for a fifth straight month, moving from 53.4 in March to 54.2 in April.[2] PMIs in the US and Europe rose although China’s fell.[3] US nonfarm payrolls growth accelerated modestly along with wage growth in April [4], which we believe alleviated some concerns around an impending recession but did not appear to significantly alter monetary policy expectations. U.S. Bureau of Labor Statistics data showed headline and core CPI decelerated only modestly to 4.9%/5.5% YoY in April (from 5.0%/5.6% YoY the prior month, still well above the Fed’s 2% target).[5] Likewise, Eurostat data showed Eurozone inflation was somewhat stagnant, accelerating slightly to 7% YoY in April compared to 6.9% YoY in February.[6] The bond-equity correlation remained positive and the dollar continued to trade in its YTD range.[7]
In early May the Fed hiked the Fed Funds rate by another 25bps, and signaled a pause in further rate increases.[8] We believe this was in-line with market expectations and brought the target Fed Funds rate to a range of 5.00-5.25% with the Fed Effective rate trading around 5.08%.[9] The front end of the yield curve was relatively stable, with Fed Funds futures contracts continuing to price in a terminal rate close to 5%, with the possibility of rate cuts starting towards the end of 2023.[10] The yield curve continues to be inverted with the spread between 2-year and 10-year Treasurys at -0.52%, a level which has been relatively stable over the last two months.[11] We believe the slope of the yield curve shows that we are likely at the end of this Fed hiking cycle.
We are less sure that disinflation will continue going forward, although we believe inflation is unlikely to accelerate meaningfully from here. We are monitoring the debt ceiling debate in Congress. The impasse in Congress has not yet caused a risk-off environment, but we have seen US credit default swaps rise to a record high.[12] We anticipate the outcome of negotiations in Congress will be consequential for markets.
We established new positions in three global companies that we believe are having a constructive impact on the environment and ocean health.[13] Austrian industrial manufacturer Andritz AG (Xetra: AZ2) is targeting a 50% reduction in its Scope 1 and 2 emissions compared to 2019.[14] The company also intends to increase the share of its revenue from sustainable solutions to greater than 50% by the end of 2025 and decrease annual water consumption as well as waste volume by 10% compared to 2019 levels.[15] French water, waste, and energy solutions provider Veolia Environnement SA (OTCMKTS: VEOEY) has developed policy commitments to implement 11 UN SDGs, including Goal 6 (Clean Water and Sanitation) and Goal 14 (Life Under Water).[16] Veolia’s Water Technologies Division designs and builds drinking water and wastewater treatment plants as well as water treatment equipment and services for a range of customers.[17] German conglomerate Siemens (OTCMKTS: SIEGY) has developed a comprehensive and measurable framework for implementing sustainability initiatives across six areas: Decarbonization, Ethics, Governance, Resource efficiency, Equity, and Employability.[18] In December 2022, Siemens raised its targets for decarbonization and employ learning.[19]
We continue to expect a favorable environment for risk assets in the near-term, although we are contemplating a more neutral outlook over the summer given the potential for less progress on inflation. Given we believe that we are likely at the end of the Fed hiking cycle but do not expect a sharp US recession, we do not anticipate significant downside to global equity markets absent a meaningful geopolitical event. If Congressional negotiations fail over the US debt ceiling, that would likely cause material downside although on the flipside, a resolution would probably result in further up movement for markets. We are keeping a closer eye on China given some early signs of a weakening environment there, and we are cognizant of the fact that global PMIs have risen significantly with seemingly less potential for further upside from here. We look forward to continuing to share updates to our macro view and the holdings in our thematic portfolios.
Footnotes:
[1] See https://tradingeconomics.com/vix:ind
[2] See https://tradingeconomics.com/world/composite-pmi
[3] See https://tradingeconomics.com/china/nbs-general-pmi, https://tradingeconomics.com/united-states/composite-pmi, https://tradingeconomics.com/euro-area/composite-pmi
[4] See https://tradingeconomics.com/united-states/non-farm-payrolls, https://tradingeconomics.com/united-states/average-hourly-earnings-yoy
[5] See https://tradingeconomics.com/united-states/inflation-cpi, https://tradingeconomics.com/united-states/core-inflation-rate
[6] See https://tradingeconomics.com/euro-area/inflation-cpi, https://tradingeconomics.com/euro-area/core-inflation-rate
[7] See below chart from S&P Global as well as table citing ETF performance calculations using Trading Economics data.
[8] See https://www.cnbc.com/2023/05/03/fed-rate-decision-may-2023-.html
[9] See https://www.newyorkfed.org/markets/reference-rates/effr
[10] See https://www.cmegroup.com/markets/interest-rates/stirs/30-day-federal-fund.quotes.html
[11] See https://fred.stlouisfed.org/series/T10Y2Y
[16] See https://www.veoliawatertechnologies.com/en/goal-14-life-under-water
[17] See https://www.veoliawatertechnologies.com/en/about-us
[18] See https://new.siemens.com/global/en/company/sustainability/sustainability-figures.html
COUNTRY GOVERNANCE RESEARCH COMMENTARY
First signs of Ukraine’s counteroffensive
The first signs that a Ukrainian counteroffensive may be at hand have come from the area around the besieged city of Bakhmut. After months on the defensive Ukrainian troops have managed to regain territory to the north and south of the city. Ukraine has denied that the actions amount to the start of their long-anticipated push to liberate areas occupied by Russia. Zelensky has said that they needed to wait to launch their attack until all the promised weapons were delivered in order to avoid unnecessary casualties. However, Yevgeniy Prigozhin, the commander of the Wagner troops who have spearheaded the attack on the city, has said the Ukrainian counteroffensive was in “full-swing.” Prigozhin has also complained bitterly that the Russian Ministry of Defense has not given his fighters adequate supplies, even going so far as to threaten to withdraw his forces from the battle. Further signaling that a new phase of the war may soon commence, Zelensky recently completed a trip to a number of European capitals where he secured significant new pledges of military and political support. In particular, the UK became the first country to pledge longer-range missiles and drones that the United States and other countries have thus far refrained from providing despite Ukraine’s repeated pleas for such systems. The UK has also promised to begin training Ukrainian pilots this summer on advanced Western fighter planes.
Implications: The ability of Ukrainian troops to retake in days land Russia had struggled to capture over weeks vindicates Ukraine’s strategy of remaining in the city in order to wear down Russia’s attacking force. Ukraine will now hope that the exhaustion of Russian troops will allow them to overcome the defensive fortifications Russians have spent months building along a large swathe of occupied Ukraine.
United States debt limit fight goes down to the wire
With a fast-approaching deadline to raise the US debt ceiling, negotiations between the White House and congressional leaders have intensified. Janet Yellen recently sent a letter to congress stating that the X-date when the government would exhaust the extraordinary measures it has been using to pay its obligations could come as early as June 1. The Biden administration had resisted negotiating over increasing the debt limit, instead insisting on a clean limit increase. However, when the Republicans in the House managed to narrowly pass their own plan to raise the debt limit paired with spending cuts and other policy changes, the administration’s position became untenable. Biden has since had talks with all the congressional leaders, and their staffs have also held discussions. Following, the most recent meeting President Biden expressed confidence they would be able to reach a deal, and Speaker McCarthy while saying they were still far apart agreed that an agreement could be reached in time. Recognizing that any deal ultimately would have to be agreed between the president and the speaker, the leaders agreed that subsequent negotiations would take place directly between representatives of the president and speaker. Biden is attending the G7 meeting in Japan this week, but he has scrapped a planned trip to Australia and Papua New Guinea and instead will return home on Sunday hoping to finalize a deal.
Implications: Biden’s apparent openness to some of the Republicans’ demands, such as expanded work requirements for anti-poverty programs, risks angering his progressive allies. However, there is recognition that a bipartisan agreement that can pass the House and Senate is the only way out of the impasse. Neither the use of the 14th Amendment or a discharge petition to force a clean debt ceiling increase are likely practical solutions.
Turkish presidential election goes to a second round
Turkish President Recep Tayyip Erdogan performed better than expected in the first round of voting but fell short of an outright majority. Erdogan faced his toughest campaign since he came to power in 2003, with polls leading up to the vote indicating a lead for the opposition. His main rival, Kemal Kilicdaroglu, led a six-party opposition alliance, and his supporters had hoped that recent economic turmoil and soaring inflation would propel Kilicdaroglu to a first round victory. Their hopes were buoyed by the sudden withdrawal of a third-party candidate whose supporters were expected to move to the opposition. In the end, final results of first round voting showed Erdogan just short of the 50% needed to avoid a runoff with 49.5% of the vote total. A third nationalist candidate, Sinan Ogan, who received about 5% of the vote could play a key role in the next round of voting. Expectations have been that his supporters would likely to switch to Erdogan in a head-to-head runoff, but he has left open the possibility of endorsing Kilicdaroglu. In addition, Erdogan’s People’s Alliance, comprising his Justice and Development Part and the Nationalist Movement party, were projected to have secured a majority in parliamentary elections that were held at the same time as the presidential vote. The runoff vote will be held on May 28.
Implications: Erdogan was able to rally support among his base of conservative and religious voters in order to exceed expectations, and he now has momentum leading into the final round of voting. Kilicdaroglu for his part has said he will prevail in the second round and “bring democracy” back to Turkey, reiterating his campaign theme of reversing what Erdogan’s critics see as an increasingly authoritarian style of rule.
States reach landmark deal on water cuts to stave off a crisis on the Colorado River
Three Southwest states announced Monday they have struck a historic deal to cut billions of gallons of Colorado River water usage over the next four years, about half of which would be completed by next year, in an effort to stave off a crisis at the nation’s largest reservoirs.