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Investment Strategy

Published February 26, 2024 | 10 min read time

Weekly market insights and possible impacts on investors from the Wells Fargo Investment Institute Global Investment Strategy team.

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Real Assets Spotlight: Long-term impacts of a pause in LNG export approvals

  • Over the past 10 years, the U.S. has emerged as one of the world’s largest exporters of liquified natural gas (LNG), and one of the world’s largest producers of dry natural gas.
  • Recently, however, the U.S. decided to pause additional LNG export permits. Should the pause continue beyond the next few years, we would expect to see higher and more volatile global natural gas prices.

Equities: Stock rally turns equity risk premiums negative

  • Recently, the equity risk premium (ERP) hit lows last seen during the dot-com bubble.
  • While certainly not a timing mechanism, such a low ERP is yet another indicator that stocks are expensive — especially relative to bonds.

Fixed Income: Scratching the surface on municipal bonds

  • Municipal bond yields appear expensive in comparison to Treasuries, but that does not capture the full thesis of why we are favorable on U.S. Municipal Bonds.
  • Taxable-equivalent yields, particularly for investors in higher income brackets, along with supply and demand imbalances, still provide an attractive opportunity in municipal bonds.

Alternatives: Merger and acquisition activity rebounds as confidence improves

  • The recent rise in merger and acquisition (M&A) activity may indicate that corporate leaders’ outlooks on the economy are improving, providing more confidence to engage in strategic transactions.
  • Our current unfavorable guidance on the Merger Arbitrage strategy may transition to neutral as we continue to see further evidence of an improving M&A landscape that includes higher volumes of activity, potentially lower interest rates, and a more favorable regulatory environment.

Article written by:

Head of Real Asset Strategy
Investment Strategy Analyst

Investment Strategy Analyst
Investment Strategy Analyst
Global Alternative Investment Strategist