Is Delta creating alpha?

While the Delta variant strain of COVID-19 seemed on the verge of tempering the economic recovery during the third quarter of 2021, recent signs have indicated investor optimism. Meanwhile, notable economic dislocations like supply-chain bottlenecks and labor shortages extended the inflation threat and negatively affected recent manufacturing and services data in both the United States and the euro zone. China’s regulatory crackdown has made headlines and affected stocks One large question for global asset allocators may be: With so much still in flux globally, where are the true pockets of opportunity in the post-pandemic landscape?

This investor roundup looks at these and other developments across the capital markets. Included are commentaries on efforts to overcome the “pain trade,” a look at China’s regulatory crackdown, and a discussion of the breakthrough of alternatives and other private market opportunities.

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IMPORTANT RISK CONSIDERATIONS

The views expressed represent the investment team’s assessment of the market environment as of October 2021, and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Views are subject to change without notice.

Investing involves risk, including the possible loss of principal.

Past performance does not guarantee future results.

Diversification may not protect against market risk.

International investments entail risks including fluctuation in currency values, differences in accounting principles, or economic or political instability. Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility, lower trading volume, and higher risk of market closures. In many emerging markets, there is substantially less publicly available information and the available information may be incomplete or misleading. Legal claims are generally more difficult to pursue.

Investments in small and/or medium-sized companies typically exhibit greater risk and higher volatility than larger, more established companies.

Narrowly focused investments may exhibit higher volatility than investments in multiple industry sectors.

Equity securities are subject to price fluctuation and possible loss of principal. As a class, equities carry higher risks than bonds or money market instruments.

Fixed income securities and bond funds can lose value, and investors can lose principal, as interest rates rise. They also may be affected by economic conditions that hinder an issuer’s ability to make interest and principal payments on its debt.

Fixed income investments may also be subject to prepayment risk, the risk that the principal of a bond that is held by a portfolio will be prepaid prior to maturity, at the time when interest rates are lower than what the bond was paying. A portfolio may then have to reinvest that money at a lower interest rate.

High yielding, non-investment-grade bonds (junk bonds) involve higher risk than investment grade bonds. Investment strategies that hold securities issued by companies principally engaged in the infrastructure industry have greater exposure to the potential adverse economic, regulatory, political, and other changes affecting such entities.

An investment in natural resources securities may subject a portfolio to the risk that the investment will perform poorly during a downturn in the natural resource sector.