US markets closed up overnight as a new commentary from the Fed caused yields to slightly backtrack, sparking fresh confidence in another rate hike pause that will temper markets. The Dow Jones rose 0.6%, while the Nasdaq gained 0.8% and the S&P 500 also added 0.7%, marking a solid run over the past week that has taken the index from around 4,200 all the way up to 4,350.

Upwards pressure on rare earths prices have been once again propelled after Myanmar’s Kachin State halted mining. Increasing suspension of mining activities in Myanmar have reduced the country’s exports of rare earth materials to China to around 50% of their capacity, which is significant given they accounted for 38% of rare earth imports into China during the first six months of 2023. 

This has seen prices for some rare earths significantly increasing in value, with dysprosium oxide up to US$356/kg two weeks ago – its highest level since May 2022. Terbium oxide prices also pushed through US$1,174/kg. The VanEck Rare Earth/Strategic Metals ETF was up 3.3% overnight.

Hybrid investment instruments are likely to become increasingly popular in the current macroeconomic environment, as credit returns become more attractive than equity, but investors still want exposure to equity upside in companies that are strongly performing.

Oaktree Capital Management’s David Rosenberg, who runs their high-yield bond strategy, strongly holds this view and is actively hunting opportunities in the sub-investment grade debt market.

Convertible notes are often an attractive strategy to implement when seeking exposure to earlier stage companies who have strong growth prospects. They give exposure to the equity if the company executes on their plans and provide investors the ability to recall their funds, after earning an attractive yield, if the company hasn’t followed through.

One fund manager with a keen eye on interesting investment themes and potential hidden gems is Andrew Brown, Executive Director at East 72 Holdings Ltd.

Andrew will be joining us this Friday, 13th October at 12pm (AEDT) at The Insider: Meet the Fund Manager webcast, where he will share his insights on why the ‘magnificent seven’ of the tech sector ‘are not growth companies’ anymore and his view that it’s time to be a stock picker, not an index investor. He will also discuss his three favourite stocks and focus on family-controlled companies. To join us for this live session, click here.

You should only act on the information we provide if you are confident that you fully understand what you are doing. Past returns do not always indicate future returns, and it is also possible to make significant losses. There is always a risk of loss when investing.