10/05/2022

Are falling job openings a sign of cooling labor markets?

For investors, while it may seem reasonable to assume a fall in job openings would precede an uptick in the unemployment rate, the still huge gap between labor demand and supply suggests that job openings can come down further without meaningfully pushing up the unemployment rate.

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09/30/2022

What just happened to Gilts and Sterling?

In recent weeks, a series of fiscal and monetary developments led volatility to spike in the United Kingdom’s government bond and currency markets. By our lights, the combination of these events amplified uncertainty about the UK’s institutional architecture and the Bank of England’s commitment to sustainable monetary and fiscal policy.

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09/28/2022

When can the Fed stop hiking interest rates?

During the September Federal Open Market Committee (FOMC) press conference, Chair Powell noted that the Committee would like to see positive real rates across the entire yield curve as one indication that they have reached an appropriate policy stance.

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09/22/2022

Are markets more in line with Fed rate expectations?

The Federal Open Market Committee (FOMC) voted unanimously to raise the Federal funds rate target range by 0.75% to 3.00%-3.25%. The tone of the committee remains hawkish given policymakers are “highly attentive” to taming inflation that runs well above its 2% target.

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09/21/2022

How does a softening housing market complicate the Federal Reserve’s quantitative tightening plan?

The housing market has had a difficult year. Mortgage rates have skyrocketed from 3.1% to over 6.0% and home prices are up 18% year-over-year. As a result, housing affordability has been crushed leading to a sizeable decline in single-family housing construction and mortgage origination activity.

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09/16/2022

What is the risk of a market correction?

We still believe headline inflation has peaked on a year-over-year basis, but more clarity on the trajectory of inflation will be key in order for interest rate volatility – and therefore capital market volatility broadly – to decline. The Fed looks set to continue raising interest rates in a fairly aggressive way through the end of 2022, and potentially into 2023 if inflation proves stickier than expected.

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09/14/2022

When will the U.S. dollar peak?

At first glance, a “strong U.S. dollar” may seem like a positive. There are advantages: overseas trips are cheaper for U.S. tourists and foreign goods are cheaper to import for U.S. companies and consumers (helping bring down elevated inflation). However, important disadvantages exist: U.S. exports are more expensive for foreigners and foreign earnings of U.S. companies are dragged lower.

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09/09/2022

What should I know about President Biden’s Student Loan Relief Plan?

President Biden’s announcement on a set of changes to student loan repayment has generated several questions from clients. The most common boil down to: How will student debt relief impact consumers? Will the deficit impact lead to a further rise in inflationary pressures? And, is it likely to be passed?

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09/08/2022

How healthy is the consumer?

Coming into 2022, investors expected that a healthy consumer – supported by significant fiscal stimulus during the pandemic – would power the economy at an above-trend pace. While this was indeed the case at the start of the year, a series of idiosyncratic factors pushed aggregate growth into negative territory.

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08/31/2022

Is it a bad idea to invest in EM equities during a Fed rate hike cycle?

In the short-term, rate hikes may pressure EM equities, but not as much as investors may think due to: lower vulnerability to capital outflows, high interest rate differentials limiting outflows, and a greater dependence on China’s cycle versus the Fed.

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08/24/2022

What will a buyback tax mean for dividends?

The tax on buybacks will be particularly relevant for equity investors given the role share repurchases played in enhancing profit growth during the post-GFC cycle. The big question is whether or not this buyback tax will lead companies to reduce share repurchases and increase dividend payments going forward.

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08/17/2022

How will the Inflation Reduction Act impact the economy?

This week, the Inflation Reduction Act (IRA), a legislative package that includes climate spending, prescription drug pricing reform, and tax reform, was signed into law. The IRA represents a meaningful commitment to climate goals and should reduce the deficit over the next decade but is unlikely to reduce inflation and will weigh on 2023 profits.

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08/10/2022

Will global central banks’ fight against inflation lead to a global recession?

The broad takeaway is that economic conditions are softening globally, and aggressive central bank tightening is contributing to it. The global economy could avoid a recession if a stronger recovery emanates from China in the second half of 2022, and a soft landing is achieved in regions like the U.S. and Europe, however, that outcome looks increasingly challenging.

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08/03/2022

How should I think about investing in alternatives?

There are three roles that alternative investments can play in a diversified portfolio – they can provide income, diversification, or enhance returns. Importantly, these are not mutually exclusive; some alternatives – like core real assets – can provide a combination of both income and diversification.

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07/28/2022

Has the Fed shifted more or less hawkish?

For investors, further tightening is ahead; however, a data-dependent committee suggests an increase in the federal funds rate to above 3.5% in this cycle is now less likely.

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07/20/2022

Is the 60/40 dead?

Since emerging from the Financial Crisis, a 60/40 portfolio of U.S. stocks and bonds has earned a whopping 11.5% average annual return. However, 2022 has been a particularly challenging year for the 60/40, which declined 16.1% in the first half of the year.

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07/13/2022

Is there a role for private real estate in my portfolio?

What has not come into question is whether investors will need alternative sources of income and diversification. As such, it seems increasingly likely that private real estate will be part of the broader investment conversation in the years to come.

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07/06/2022

Are we already in a recession?

Looking ahead, we recognize that recession risk has risen. That said, it seems premature to make a call that we are already in recession today.

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06/29/2022

Does investing in European equities still make sense?

The tragic war in Ukraine has led to an indiscriminate sell-off in European equities. While headlines weigh on sentiment, the 1Q earnings season was strong for Europe.

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06/22/2022

What are the investment opportunities in sustainable construction?

Many of the innovations and technologies needed for a carbon neutral economy are not yet available, but there are still many existing solutions that can be implemented today to reduce emissions, particularly in how we manage energy efficiency in buildings and appliances.

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06/16/2022

Will the Fed tip the economy into recession?

For investors, the Fed has laid out a hawkish path for rate increases with the intent to front load rate hikes. With such aggressive tightening this year, recession risks have risen further in 2023.

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06/09/2022

What should I know about quantitative tightening?

Even as QT commences, long-term rates are likely to trade range bound between 3.00%-3.5% and be little impacted by balance sheet reduction at first. That said, as bank reserves decline to levels that may restrict bank activity, markets will likely signal the Fed may need to change course.

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06/03/2022

Are you worried about an earnings recession?

While rising interest rates and a more hawkish Federal Reserve (Fed) help to explain what has gone on with valuations, it was not as clear why earnings estimates continued to move higher. Interestingly, however, companies have begun guiding earnings expectations lower in recent weeks, as it appears too difficult to continue ignoring rising costs and economic growth that is decelerating back toward trend.

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05/27/2022

Should I time the bottom in today’s market?

Long-term investors are facing a number of challenges today. Multi-decade-high inflation is eroding purchasing power and portfolio values, and recent volatility across capital markets has made the investment landscape look perilous.

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05/25/2022

Are bonds attractive?

The spike in yields through the first five months of this year has led to some very ugly returns in fixed income.

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05/20/2022

Are we in or headed towards a recession?

The US economy is showing signs that the post pandemic surge is beginning to moderate, but we do not think a recession is imminent. Nonetheless, stocks are near correction territory, consumer sentiment has soured to levels last seen in 2011, geopolitical tensions are elevated, and prices are higher everywhere; all of which challenge this view.

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05/18/2022

What are the investment opportunities in renewable energy?

Progress on mitigating climate change hinges on cleaner energy as 73% of global greenhouse gas emissions come from energy usage in industry, buildings, and transport.

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05/13/2022

How do investors navigate market volatility?

The war in Ukraine is causing surging commodity prices, COVID lockdowns in China are exacerbating strained supply chains, and 40-year-high inflation has prompted the Fed to aggressively tighten monetary policy. Together these dynamics are also creating uncertainty about future growth.

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05/11/2022

When will China’s economy and markets find their footing?

The Year of the Tiger was expected to be a year of stabilization for China’s economy and of recovery for its equity market, following last year’s tough Year of the Ox. However, instead of positive surprises, investors have continued to grapple with uncertainties, both new and old.

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05/06/2022

Tax planning? Or a plan for taxes?

At the end of the day, active tax management is a way to take advantage of volatility. Volatility is a hallmark of the capital markets, but it also tends to derail investors and undermine their ability to reach their long-term retirement goals.

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05/05/2022

How aggressive will the Federal Reserve (Fed) tighten monetary policy?

At its May meeting, the Federal Open Market Committee (FOMC) voted to raise the Federal funds target rate range by 0.50% to 0.75%-1.00% and signaled similar 50 basis point rate increases would be on the table for the next couple of meetings.

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04/29/2022

Does China’s “COVID zero” approach threaten global supply chains?

Since the onset of the pandemic, global supply chains have been stressed, weighing on economic growth and lifting consumer core goods inflation. Supply chain issues had seemed to peak in December, with some encouraging improvement in the first two months of 2022.

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04/27/2022

How do geopolitics highlight the need for more sustainable innovation?

Although climate change is a key consideration in sustainable investing, sustainable investing is more broadly about finding companies that are durable in the long run and identifying risks that traditional company analysis may not capture.

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04/22/2022

What’s going on with the housing market?

U.S. home prices have experienced incredible appreciation over the last decade, with particular strength in the years since the COVID-19 pandemic outbreak.

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04/20/2022

What are the investment opportunities in recycling and re-use?

The first thing most of us learned as children about protecting the environment was reduce, reuse, recycle. Those enduring principles are particularly relevant for companies looking to reduce their environmental footprint and their costs.

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04/14/2022

What should investors expect for 1Q22 earnings?

With financials kicking off the first quarter earnings season this week, our current estimate for 1Q22 S&P 500 operating earnings per share (EPS) is $51.01 ($42.80 ex-financials), representing year-over-year growth of 7.6%.

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04/13/2022

Why is there so much demand for labor?

The March employment report showed that the U.S. economy continues to recover in the aftermath of the COVID pandemic, with the labor force exhibiting signs of multi-generational tightness.

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04/08/2022

Has the sell-off created an opportunity in growth stocks?

2022 has seen a volatile start, with many of the growth names that performed well in the initial stages of the pandemic – as well as over the prior cycle – under pressure.

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04/06/2022

Should investors hedge the currency when investing in international equities?

Over the last 15 years, international equities have underperformed U.S. equities by a cumulative 270%. Currency played a role in this underperformance, subtracting 25%, as foreign currencies steadily weakened against the U.S. dollar.

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04/01/2022

Just how hot is the labor market?

One of the most critical levers to reduce carbon emissions globally is transportation. Transportation accounts for 16% of global greenhouse gas emissions, with nearly three-quarters coming from passenger travel and road freight.

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03/30/2022

What are the opportunities in sustainable transportation?

One of the most critical levers to reduce carbon emissions globally is transportation. Transportation accounts for 16% of global greenhouse gas emissions, with nearly three-quarters coming from passenger travel and road freight.

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03/25/2022

Is market timing worth it during periods of intense volatility?

2022 will likely remain volatile for equity markets, as central banks normalize alongside persistently hot-inflation and geopolitical issues result in prolonged uncertainty.

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03/23/2022

What’s been driving the equity market rebound?

Last week marked the best week for U.S. equities since November 2020, with the S&P 500 erasing almost half of its year-to-date losses. The S&P 500 is now only down 6.4% versus its max drawdown of 13% in 2022.

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03/18/2022

How might markets perform as the Federal Reserve hikes interest rates?

For the first time since December 2018, the Federal Open Market Committee (FOMC) voted to raise the Federal funds target rate range by a ¼ percent to 0.25%-0.50% at its March meeting and made clear further increases would be appropriate to tame inflation.

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03/16/2022

Does the case for investing in EM equities still hold?

Emerging market (EM) equities are underperforming for a second year, down -16.4% year-to-date after last year’s -2.2%.

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03/11/2022

What are the impacts of rising energy prices?

Before Russia’s invasion of Ukraine and its impact on commodity markets, we thought inflation might finally see its peak in February.

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03/09/2022

How should investors position for a yield curve inversion?

An inverted yield curve driven by short rates rising more than long-term yields has preceded every US recession since 1960 and is therefore a closely watched metric among investors regarding the outlook for the economy and markets.

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03/04/2022

Has the outlook for monetary and fiscal policy changed?

While geopolitical tensions have reached a boiling point overseas, American investors have recently faced a set of potentially market-moving events at home: President Biden’s first State of the Union address and Federal Reserve Chair Powell’s testimony in front of Congress on monetary policy.

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03/02/2022

How should I think about geopolitics and volatility?

Despite the horrible human and social impact, the conflict in Eastern Europe is currently noise for the market. Time will tell how things evolve, but the key risk is that higher commodity prices – and energy prices in particular – fail to be transitory.

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02/24/2022

Should I worry about Russia/Ukraine tensions impacting markets?

Geopolitical tensions involving Russia and Ukraine have been a source of market volatility, especially since February 11th when President Biden warned there was a “very distinct possibility” of a coming Russian invasion of Ukraine.

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02/23/2022

Will the Federal Reserve hike rates by 50 basis points in March?

Since the start of the year, markets have meaningfully repriced expectations for rate hikes from the Federal Reserve (the Fed) this year; projections have risen from 2-3 25 basis point (0.25%) increases to 6-7 currently.

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02/18/2022

Where are the opportunities in sustainable food and water?

The coexistence of food waste and world hunger reflects a classic market failure. About 17% of food goes to waste globally, and yet an estimated 690 million people (8.9% of the world population) are undernourished.

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02/16/2022

How would international equities perform during a U.S. boom-bust recession?

In both a U.S. led boom-bust recession and global synchronous growth, international equities could outperform, suggesting a key role for the asset class in portfolio construction.

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02/11/2022

Do investors really chase performance?

Time and time again, investors get caught up in the good times and buy an asset when its price is inflated, only to turn around and sell it once optimism has receded and the price has fallen.

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02/09/2022

Why do advisors need to re-think retirement income?

Retirement income can be a challenge for many advisors, and advice given to clients has often relied on rules of thumb based on assumptions of how households spend post-retirement.

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02/04/2022

What does the Social Cost of Carbon mean for investors?

Regulatory action on carbon emissions is likely to intensify over the coming years, and companies that are actively addressing these risks could have a competitive advantage in the future.

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02/02/2022

What to expect in China from the Year of the Tiger?

2021 was a year of steady reform introduction by Chinese authorities, focused on the long-term goals of improving the quality of growth and on addressing non-economic priorities like inequality, leverage, and decarbonization.

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01/28/2022

Jay be nimble, Jay be quick: How to position for a more hawkish Fed?

Fixed income can still play defense during periods of market turbulence and investors would be wise to maintain exposure through a more active approach as rates grind higher.

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01/26/2022

U.S. equity markets are in or near correction: now what?

After a rocky start to the year, a number of major U.S. equity markets are in or near correction territory.

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01/14/2022

What is the outlook for alternatives in 2022?

There are plenty of opportunities across the alternative investment landscape. However, any allocation to alternatives should be outcome-oriented.

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01/07/2022

December recap: Are investors positioned for monetary shifts in 2022?

There was no shortage of market catalysts to begin December, with the emergence of the Omicron variant and hawkish comments from Federal Reserve (Fed) Chair Powell stirring the markets.

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01/05/2022

What will happen to the top 10 S&P 500 companies in 2022?

2021 was a better year than expected for U.S. equities, as a 34.5% increase in earnings expectations offset a 7.6% decline in valuations, leading to a price return of 26.9%.

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12/23/2021

Is Build Back Better dead?

This week, hopes of passing the Build Back Better (BBB) Act, the climate and social spending package, were dashed when Senator Joe Manchin of West Virginia said he would not vote for it due to concerns over further stoking inflation and increasing the national debt.

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12/22/2021

Should I expect a year-end correction?

Although lockdowns and restrictions may drag on economic activity in the near term, we see three key drivers of economic growth in 2022.

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12/17/2021

How can employer-sponsored plans better serve younger adults?

It is key that employers innovate the employee experience for younger professionals. Explore how employer-sponsored plans can better serve young adults.

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12/16/2021

Has the Federal Reserve (Fed) shifted more hawkish?

Overall, investors should be prepared for an active Fed over the next few years. We expect the Fed to begin raising rates in June, and deliver one hike per quarter thereafter.

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12/10/2021

Does a continued inflation heatwave mean a more hawkish Fed?

The November CPI report showed consumer prices rising at their fastest pace in nearly 40 years as surging gasoline prices, vehicle prices, and owner’s equivalent rent continued to drive inflation upwards.

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12/08/2021

November recap: How were portfolios positioned for November markets?

Although risk assets enjoyed positive returns for most of November, the emergence of a new COVID variant and a hawkish pivot from the Fed prompted a risk-off environment to close the month, with investors positioned accordingly.

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12/03/2021

Is volatility higher because of omicron?

Volatility has come roaring back, with the S&P 500 seeing its worst 2-day performance in over a year and the VIX back above 30 for the first time since February.

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12/01/2021

When will China’s economy find its footing?

It is now becoming clear that Chinese policy makers no longer focus exclusively on the quantity of growth, but also on its quality. In addition, several other policy goals are taking priority as well, such as deleveraging, decarbonization, common prosperity and public health.

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11/24/2021

Is Jay here to stay?

President Biden voted for continuity in monetary policy with his renomination of Jerome Powell to another four-year term as Federal Reserve Chair. He also elevated Governor Lael Brainard to Vice Chair, replacing Richard Clarida.

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11/19/2021

What progress was made at COP26?

Some areas of the agenda were advanced, true progress may have been postponed to the end of 2022, when countries are expected to recommit or strengthen their net zero commitments, which currently fall short of limiting global warming to 1.5 degrees Celsius.

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11/17/2021

Why are rates moving, just not higher?

Rates have experienced some big swings recently, even though they have traded within a fairly narrow range over the past couple of months.

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11/12/2021

What does Fed policy mean for a fixed income portfolio?

Looking forward, while we don’t yet know which of the previous periods the next cycle will best resemble, the market is currently pricing Fed “liftoff” in mid-2022, with a total of five hikes complete by the end of 2023.

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11/10/2021

Where do we stand on infrastructure spending?

From our vantage point, it seems like a given that the President will sign the bipartisan bill into law. Looking at the budget reconciliation package, a deal will get done but it may come down to the wire.

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11/05/2021

Are all global central banks on the move?

Investors should not paint all central banks with the same brush stroke as normalization will come in different shades: some central banks are already or close to being on the move, others will remain somewhat patient until next year, while others will remain firmly on hold.

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11/04/2021

How will the FOMC begin to reduce policy support?

Tapering is not tightening, and while purchases will slow in the months ahead, the balance sheet will still expand by roughly $400 billion from now until mid-2022 and settle at around $9 trillion.

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10/29/2021

When will supply chain disruptions be resolved?

Semiconductors have come into focus as one of the best examples of the supply constraints faced by the global economy.

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10/27/2021

What can we expect from the U.N. Climate Change Conference?

The last summit in 2015 resulted in the Paris Agreement, an international treaty addressing climate change mitigation (by aiming to limit the increase in global temperatures by 1.5 degrees Celsius above pre-industrial levels), climate adaptation, and climate financing. Therefore, we anticipate meaningful discussion on these topics: achieving net zero, fiscal efforts , climate financing, carbon pricing.

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10/22/2021

What challenges are the Chinese economy and markets facing?

Recent economic data affirms China’s slowdown as the economy normalizes while still facing lingering pandemic obstacles and the consequences of its intentional long-term reforms.

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10/20/2021

Has the government run out of funding?

While these fears were warranted following the near technical defaults experienced in 2011 and 2013 due to the same debt ceiling issue, by a narrow vote, the House raised the debt ceiling on October 12th by $480 billion to $28.9 trillion, averting a technical default.

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10/14/2021

Is inflation still transitory?

While higher inflation and a recent slowdown in economic growth have stoked stagflation fears amongst investors, we continue to expect inflation to tame in the coming months.

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10/13/2021

Why do investors love technology companies?

Most investors seem to agree that technological adoption looks set to continue, but more and more we see people questioning the price they are paying for this exposure.

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10/07/2021

Why are oil prices soaring?

While it was expected that easing pandemic conditions would support demand for oil, the move in spot prices this year has caused investors to question whether these price pressures will persist and lead to higher inflation.

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03/12/2021

What kind of equities should I own if inflation is rising?

The remainder of 2021 should see an acceleration in economic activity, rising inflation, and higher interest rates. In general, this dynamic should support the outperformance of value relative to growth, with attractive relative valuations acting as an additional tailwind for value outperformance.

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01/13/2021

When will U.S. debt become unsustainable?

With U.S. federal debt at 100.1% of GDP, the highest since World War II and rising, investors wonder what the breaking point could be.

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03/09/2020

What does the latest oil price collapse mean for investors?

It is important to avoid trying to predict the future; rather, clients are best served by monitoring the present situation and maintaining composure.

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03/03/2020

Monetary medicine of limited effectiveness

Even with this Fed action, there will likely be calls for fiscal action to support to businesses suffering from the response to virus fears, says David Kelly.

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