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62 news articles are available
04/23/2024
Investment Talks
Remain agile in bond selection, with an eye on last mile inflation
Though the US economy and consumers appear to have largely defied the "gravitational pull" of significantly tighter monetary policy, we continue to view the risk of a recession during 2024 as higher than normal. We expect that such a recessionary scenario would lead to significantly greater interest rate cuts, while the "no landing" scenario of more persistent inflation would delay the start of rate cuts. As developed economy central banks continue to grapple with when to start normalizing local monetary policy, now could be an interesting time for investors to strengthen their portfolios by extending the duration of their fixed income portfolios and raising credit quality and liquidity profiles while carefully weighing global opportunities.
04/22/2024
Cross Asset
A window of opportunity for European equities
After a strong close to 2023 and a resilient first quarter, we expect the US economy to decelerate as we continue through 2024. The most vulnerable segments of the economy are showing signs of stress, although data on the broader economy remain mixed. We continue to expect inflation to moderate amid some volatility, particularly on the sticky services side, as domestic demand cools. We acknowledge the trend strength in risk assets, but high valuations are preventing us from massively shifting our risk gear upwards. The equity rally is broadening and we see a rotation towards European equities, where we have now a neutral stance.
04/17/2024
Investment Talks
US High Yield Market Outlook and Positioning
Although first-quarter returns proved to be anemic, at least they were consistent. Across the quarter, monthly returns were positive and spreads moved tighter. With inflation's decline stalling, short-term rate expectations stabilized. Within high yield, Treasury yield increases largely negated the effects of tighter spreads, leading to returns near the index's coupon yield. Although CCCs were the best performers in the US and globally, the US High Yield Distressed Index (comprised of issuers with spreads over 1000 basis points) underperformed the broader US high yield market, indicating investors were more interested in high-yielding bonds than in potential workouts.
04/08/2024
Global Investment Views, Equity, Fixed income
The late-cycle environment continues to play out
Stocks are pricing in a rosy scenario in terms of economic growth, which has led to strong upside already this year, with some broadening of the rally evident recently. These movements are further aided by ample liquidity and robust earnings, particularly in the US. The messaging from the Fed and the ECB has been focused on how important it is for inflation to come down for them to reduce rates, even though the debate continues on whether the neutral rate has moved higher.
04/05/2024
Investment Talks
Bonds Take Center Stage
For most of the last year, savers have been earning a reasonable return in cash. But how long can these compelling cash rates last? Historically, the answer has been: not very long. In every rate hike cycle since the 1970s, the US Federal Reserve has “paused at the peak” federal funds rate for a matter of months, not years, and history suggests the rate cuts could begin soon. With history as a guide, we believe investors may benefit from locking in some of today’s historically elevated interest rates by moving out of cash and into short-term bonds.
03/15/2024
Cross Asset
Six questions concerning the weakness behind US resiliency
In January we had some upside surprises, encompassing import prices, producer prices, both the headline and core Consumer Price Index, and the Personal Consumption Expenditure deflator. We think prices were in part boosted by seasonal factors which are not fully accounted for in the usual seasonal adjustment. The weakness in January retail sales and a downward revision of November and December readings signal, in our opinion, a potential downshift in consumer spending. Credit card and auto loan delinquency rates continue to rise according to the New York Fed report; consumption so far has been supported by the depletion of excess savings but US households have also taken on more debt, and some of those loans are becoming delinquent, especially credit card and auto loans, which are now above pre-COVID levels.
03/04/2024
Global Investment Views, Equity, Fixed income
Markets, economy and valuations: debate rages on
We believe valuations are excessive in some segments, such as mega-caps, where profit margins are also high. But the key question is whether these high margins justify current valuations? And will these companies be able to grow their top line quickly, while maintaining margins in a context of increased global competition and exhausted consumers? On the other hand, judging the direction of the economy is becoming increasingly difficult.
03/01/2024
Investment Talks
Passive to Active: Words of Wisdom from Ted Lasso
Passive strategies have generally have fared well over the past decade, which has made it easy to forget the long periods during which active managers outpaced passive approaches. The reasons we believe market concentration will decline include (1) a shrinking earnings advantage for the top ten companies, and (2) seemingly unsustainably high valuations. We believe investors may benefit from investing with active managers that thoughtfully select their exposure based on the earnings and valuation profile of each stock.
02/13/2024
Cross Asset
Japan equity: top performer in 2023; remains attractive option for 2024
Three key arguments support the Japanese market: (1) A recovery in profits (2) A strong incentive from the Tokyo Stock Exchange for companies to improve their capital efficiency and (3) The shift out of deflation is boosting a market rerating. The risks to these positive arguments are mostly linked to the yen. A strong comeback by the yen, should global equity volatility increase sufficiently in 2024 to encourage the unwinding of carry trades, would weigh on the performance of Japan's equities in local currency It would penalize profits and, everything else being equal, slow the process of increasing inflation, weighing on valuations at the same time.
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