Sally Bartunek, trader at Ninety One, discusses the main takeaways from the market’s reaction to the US election results, in addition to the US Federal Reserve’s and Bank of England’s decision to cut interest rates by 25 basis points. She looks at how fixed-income markets performed and where she saw surprises in emerging markets.
In this episode, Bartunek unpacks how she trades and strategizes “a game plan” during highly volatile events.
Looking ahead, Bartunek discusses how trading desks could approach the final few weeks of 2024, as they wrap up the year.
Interview Transcript
Jo Gallagher Welcome to Trader TV This Week your insight into how trading desks can prepare for the week ahead, I’m Jo Gallagher. Today I’m joined by Sally Bartunek Ninety One to discuss the main topics and events leading this week. Sally, welcome to the show.
Sally Bartunek Hi Jo. It’s great seeing you again.
Jo Gallagher So we have a lot to discuss. What were your biggest takeaways from last week’s events?
Sally Bartunek So as you know, we had the US elections, which was pretty exciting. A lot of participants were actually logged on outside of their hours into the Asia hours, hoping for a glimpse of any market movements as their results came through. As a matter of fact, I had one trader remark in a global chat that he’s never seen so many green dots on at once between the different time zones. As for the election results, the market was positioned for the outcome despite the polls being so close. What was priced out of the market was the possibility of a contested election. We actually got results fairly swiftly compared to prior years. We also had the Fed on Thursday, they cut 25 basis points as expected, and true to form in the Q&A, they steered clear of any political questions. As a matter of fact, they said in the near term that politics will have no effect on their policy.
One other interesting takeaway that I saw in the market was US IG (investment grade) spreads. US IG spread have been flirting with the all -time tights of 2005, in the recent weeks, and post-election results, we did see that go through and it tightened further. That’s because US treasuries sold off and yields went higher. So you had some all-in-yield buyers for US IG bonds. If you look at the composition of the index compared to 2005, the quality was actually better then. So if you adjust for a worse quality index today and the fact that it’s through those 2005 levels, US IG spreads have really outperformed. And they definitely look expensive and that’s why you saw some people taking chips off the table, the spread investors taking profits on the flip side of that.
Jo Gallagher Were there any surprises in the markets that you cover?
Sally Bartunek For sure, I think the main one was Mexican assets. So with the election outcome, we were expecting quite a sell off, especially behind U.S. Treasuries we expected local rates to sell off similarly or if not more. And initially, it gapped wider at the open. But throughout the day, we actually saw some better buying come through. The liquidity wasn’t great there, but ultimately, Mexican yields outperformed US Treasury yields on Wednesday by the end of the day.
So that was really surprising. And the other part of that is Mexican corporates, a lot of these had gotten really beaten up going into the election. But then we actually saw some buying coming through in the more liquid credits and they outperformed. They were flat in the day compared to other assets in the EM corporate space that were down like half a point, a point, if not more.
Jo Gallagher As a trader, how do you interact markets during these kinds of volatile events?
Sally Bartunek It’s tough because especially in emerging markets, you don’t always get the liquidity that you want. So we have to be a bit pragmatic about ideas and trades that we can or can’t do. So there’s major dialog between us and the investment teams. As for myself, when I get an order in a volatile market, I try to come up with a game plan. And there are a few things to consider, like urgency of the trade too. Like, are there any limits or targets that the PMS might have? And behind that is how do I want to execute it? Looking at some of the screen prices in these illiquid markets, they’re not necessarily executionable.
So for me, is it because the market’s moving fast or is it because it’s an illiquid asset? And those prices might be stale and there might be price discovery that’s involved. Again, it’s more dialog with the teams trying to find that clearing level. Also, there’s some at times pressure to get trades done. Now, would I rather be patient and take my time with this trade? Can I afford to? The way the market’s going? Or do I need to get it on and hope that I got in front of the market.
Jo Gallagher I know it’s a really difficult question to answer. But how do you approach the next few weeks as you wrap up the end of the year?
Sally Bartunek Despite having definitive election results, there were instances where I’ve heard in speaking to peers in the industry where they just couldn’t get their trades done, be it because of the market reactions or because some funds just need board approval so they could it be as nimble as they wanted to be. A lot of people are sitting on their hands a bit to see how it clears, like was the reaction last week temporary or is it a new trajectory for our asset class?
Asset managers have largely outperformed their benchmarks. So it feels like going into the end of the year, people are going to try to protect that performance. But then they also have to be nimble for any potential opportunities as well. EMs are very exposed to the incoming administration’s policies, so they [for] one, will be watching for their tone and for any potential moderation to their campaign promises. The biggest thing that we’re watching out for is tariffs at the moment and it would be interesting to see how they plan to balance their agenda and the higher costs through imports that could be passed on to the consumer. I think that’s the biggest one.
Jo Gallagher Thank you Sally for your insight, and of course you for watching. This has been Trader TV This Week.
Catch the show each week:
To watch other Trader TV This Week shows go to – Video
Or make sure to follow us on LinkedIn – Trader TV’s LinkedIn
Available as a podcast – here
