Read this article to understand:
- Whether rising yields mean bonds offer value to investors
- How the list of the world’s biggest companies has changed over time
- The fluctuations in oil prices
A new era for fixed income?
Bond yields have reached their highest levels in a decade. Yet the question still needs to be asked. In a world with higher inflation and a higher “risk-free” rate, do newly issued corporate and government bonds offer decent value?
Figure 1: Bond yields start to soar (per cent)
Source: Aviva Investors, Bloomberg. Data as of January 1, 2023
Where did all the Japanese companies go?
In 1989, 14 of the top 20 biggest companies in the world by market capitalisation were Japanese. However, after 30 years of deflation and stagnation, there isn’t a single Japanese company left on that list. Only one – Toyota – makes the top 50.
Meanwhile, 15 of the top 20 are now US based, four of the tech giants – Apple (#1), Microsoft (#2), Alphabet (#4) and Amazon (#5) – make the top five, while Meta is in 14th position. It will be interesting to see whether that composition changes in 2023, with high valuations and a more challenging earnings environment presenting headwinds to tech stocks.
Figure 2: 20 largest companies by market cap: 1989 versus 2023 (US$ billion)
Source: 1989 = Bloomberg Business Week, July 1989. 2023 = CompaniesMarketcap.com. Data as of February 20, 20231
The price of oil
Oil prices, along with other commodities, soared following COVID-19 and Russia’s invasion of the Ukraine in early 2022. But from June 2022, the price has fallen sharply amid concerns of a global economic slowdown, a milder winter and the efforts of countries to diversify supplies and accelerate the shift to renewables.
As for what happens this year, the big question is whether a slowing growth outlook in the US and Europe will be offset by rising Chinese demand as its economy finally reopens after severe COVID-19 restrictions.
Figure 3: WTI crude oil price, 2018-2023 (US$)
Source: Aviva Investors, Refinitiv. Data as of February 20, 2023