The Test Company
Insights Now
Dr. David Kelly, Chief Global Strategist
Our thought leaders sit down for a conversational breakdown of big ideas, future trends, emerging topics and their investment implications complete with key takeaways to help inform building stronger investment plans and portfolios for the long-term.
Trending Topics
Impact of missing the best 10 days in the market
Losses hurt more than gains feel good. During periods of market declines, a natural emotional reaction is to sell out of the market and seek safety in cash. However, keep in mind, the best days in the market are likely to occur close to the worst days. Staying the course with a diversified long-term investment strategy may produce a better retirement outcome.
Mexico and Canada took the spotlight this week after President Trump announced plans to impose 25% tariffs on its USMCA partners starting February 1st., as well as an investigation into unfair trade practices by China and others.
High hopes for the U.S. equity market this year are underpinned by expectations of robust corporate profits, and early indications of 4Q24 earnings have not disappointed.
Natural disasters impose severe hardships on families and communities, and our thoughts are with those affected by the wildfires in Southern California.
Over the past two years, healthcare stocks have experienced significant outflows and underperformance relative to the broader market, despite positive catalysts like innovation and weight-loss drugs.
The spread between the 3-month U.S. Treasury bill yield and the 10-year U.S. Treasury yield, commonly referred to as the yield curve spread, is a vital indicator in financial markets and is closely monitored by investors and the Federal Reserve, particularly given the historical efficacy of its inversion predicting U.S. recessions.
2024 was a busy year. Global economic growth diverged amidst elevated uncertainty; nearly half of the world's population went to the polls, igniting debates around policy; inflation eased across major economies, with policymakers seemingly successful in engineering a "soft landing"; and risk assets performed well, though the dispersion of returns across asset classes widened.
The U.S. dollar has continued to defy gravity, rising 7% in 2024 despite two Fed rate cuts. While the DXY Index peaked in September 2022, the U.S. real broad effective exchange rate (REER), which measures the dollar’s value relative to a broad basket of currencies adjusted for inflation differentials, remains near all-time highs.
To conclude the year, tariffs have once again become a focal point, with Google searches for the term spiking in November and December.
At its final meeting, the Federal Open Market Committee (FOMC) voted to reduce the Federal funds rate by 0.25% to a target range of 4.25%-4.50%, cutting rates by a 100 basis points (bps) or 300bps annualized in 2024.
As Paul Krugman famously stated in 1990, “Productivity isn’t everything, but in the long run it is almost everything.” By boosting productivity, an economy can enhance its standard of living by producing more with the same or fewer resources. In essence, productivity is a key driver of economic prosperity.
Today, investors are trying to understand the “series of tubes” that enable artificial intelligence. Behind every interaction with an AI tool is not only a complex web of digital neural networks, but also a humming physical network of data centers, electricity lines and power plants.
The alternative investment landscape often evolves gradually. Assets may be priced infrequently and therefore are less sensitive to day-to-day market moves.
Bitcoin has staged a remarkable rally this year, doubling in price to nearly $100,000. As of today, it is near an all-time high.
The dominance of Big Tech in digital services has enabled them to scale and grow in unprecedented ways, but has also raised concerns about their expanding power.
Former Federal Reserve (Fed) Chair Janet Yellen described the first episode of balance sheet drawdown from 2017-2019 to be “like watching paint dry”.
Today’s economic environment differs meaningfully from 2018—while the inflation heatwave is mostly past us, its embers are still alive.
In 2018, the U.S. corporate tax rate was slashed from 35% to 21% when the 2017 Tax Cuts and Jobs Act (TCJA) went into effect. On the campaign trail, President-elect Trump proposed a further reduction from 21% to 15%, specifying this would apply to companies that make their products in America.
With the U.S. election results settled, investors are now evaluating the economic policy implications. U.S. risk assets are buoyed by the ongoing soft landing and prospects of deregulation and lower corporate taxes.
In its penultimate meeting of 2024, the Federal Open Market Committee (FOMC) unanimously voted to lower the federal funds rate by 25 basis points to a target range of 4.50%-4.75%.
Former President Trump has been declared the winner of the U.S. Presidential election, securing the Electoral College and likely the popular vote. Republicans regained control of the Senate and are expected to gain control of the House as well.
From COVID stress, to a blowout recovery, to an earnings recession, to prodigious growth from the biggest names in Tech, earnings have been through a lot these past few years. But as growth and inflation normalize, so too should earnings.
Since the Fed’s jumbo 50 basis point rate cut in September, U.S. 2-year and 10-year Treasury yield have risen by 54bps and 59bps to 4.15% and 4.29%, respectively.
With the U.S. elections just a week away and polls indicating a tight race, investors are closely assessing potential impacts for currency markets.
If the U.S. economy were a pop star, it might be peak Taylor Swift. On nearly every major measure of economic health, the economy is in great shape and far ahead of its developed market peers.
Housing inventories remain near record lows, yet builders are not increasing construction volumes enough to sufficiently meet demand. Why aren't builders ramping up activity?
The combination of the stimulus announcement plus cheap valuations and underweight positions resulted in a surge in net flows into Chinese equities summing up to $12.7 billion from September 24th to October 14th.
The American consumer has been resilient in the face of significant headwinds, helping keep the U.S. economy afloat and increasing the likelihood of a "soft landing". However, while aggregate consumption has remained robust, the way the consumer is spending across categories has changed since the start of 2020.
Recent years have seen a significant acceleration in clean energy investment and grid decarbonization alongside the implementation of the Inflation Reduction Act passed in August 2022.
After retracing 8.5% by early August, the S&P 500 had just about fully recovered by the end of the month, and subsequently powered to new highs after the Federal Reserve delivered a jumbo 50 basis point rate cut.
Chinese equities had a spectacular end to September, with the MSCI China up 21% from September 24th to 30th. The catalyst was the announcement of a series of economic stimulus measures focused on the housing market, domestic consumption, and the stock market.
Utilities have traditionally been known for their defensive properties, which makes the combination of robust economic growth, technological excitement and elevated bond yields an unlikely recipe for their outperformance.
Utilities have traditionally been known for their defensive properties, which makes the combination of robust economic growth, technological excitement and elevated bond yields an unlikely recipe for their outperformance.
Emerging market equities sold off along with other markets in early August. However, they have since rebounded 8%, bringing YTD performance to 11%. While China lags due to ongoing economic challenges, recent developments have sparked a small recovery.
The relative strength and direction of the U.S. dollar matters: trade balances can fluctuate, multinational corporations can see foreign sales rise or fall and U.S. dollar-denominated investors in international markets can see returns amplified or diminished.
In a highly anticipated decision, the FOMC voted to lower the federal funds rate by 50 basis points to a target range of 4.75%-5.00%, a larger-than-expected move and their first move lower since March 2020.
The change is most evident in international trade data. China's share of U.S. imports peaked at 22% in 2018 during the U.S.-China trade conflicts and sits at 11.5% as of June 2024.
The August CPI report showed further progress in inflation making its way down to 2%, setting the Fed up to begin normalizing monetary policy next week with a quarter point rate cut.
In this piece, we compare the proposals of Vice-President Harris and former President Trump across taxes, trade and immigration, and the potential market implications of different election outcomes.
Elevated public market valuations, historically low bond yields and positive stock-bond correlation are all challenges facing the traditional 60/40 portfolio. Moving forward, investors may need to rely on alternative asset allocations to enhance return, income, and diversification in their portfolios.
“The time has come” was a memorable phrase from Chair Powell’s speech at the Jackson Hole Symposium last week. After a few false dawns this year, Federal Reserve rate cuts are imminent, with the discussion now shifting to how quickly rates will come down.
Interest rate expectations have changed wildly since the start of the year. While these expectations will continue to evolve as new data are released, one thing seems clear: the Federal Reserve will begin its rate cutting cycle this year, and it will cut by more in 2024 than it had previously telegraphed.
Markets have largely rebounded from the volatility of the past two weeks. The S&P 500 has recovered 3.0% after a 4.8% decline, U.S. Growth equities have risen 4.3% following a 5.5% drop, and the VIX has settled at 20.7, after spiking to 55.1, its highest level since March 2020.
Large moves were seen in Japanese markets, which dropped 6% on Friday (8/2) and another 12% on Monday (8/5), marking the worst daily sell-off since 1987.
Equity markets are defying gravity. From the beginning of 2023 through the first quarter of 2024, despite widespread calls for a recession, the S&P 500 returned 40% with 6% earnings growth.
The Federal Open Market Committee (FOMC) voted to leave the Federal funds rate unchanged at a target range of 5.25%-5.50%, but hinted rate cuts are on the horizon.
Mega-cap tech has enjoyed a long winning streak, but the stars recently began to align for the underdogs to take the lead.
With the U.S. election approaching, potential U.S. policy changes are a key concern for global investors. After most U.S. elections, the MSCI EM Index has had positive performance in the 100 days following.
Later this month will mark a year since the last rate hike from the Federal Reserve (Fed). Historically, the end of a hiking cycle should have been an opportune time to extend duration by deploying cash into high quality intermediate fixed income securities.
While French politics are somewhat unique, the New Popular Front’s victory is the second win for a left-wing party so far this month after a strong defeat of the Conservatives in the UK.
Looking to the back half of the year and beyond, lingering geopolitical uncertainty and an upcoming U.S. presidential election, coupled with the divergence in performance across assets, underscores the importance of diversification in a fundamentally uncertain world.
The “Magnificent 7” has massively outperformed the rest of the market, up roughly 30% since the start of the year compared to around 5% for the remaining companies, on AI-related headlines and strong earnings growth.
Markets have a tendency to over appreciate the near term and under appreciate the long term. We think AI will lead to all sorts of business transformation and productivity gains in the long term, but recent performance has been driven by significant upgrades in near-term AI demand projections.
The average homeowners’ insurance policy cost roughly $1,900 in 2023, up over 20% from the previous year and nearly 50% from before the pandemic.
In the May CPI report, year-over-year headline inflation cooled to 3.3% from 3.4% - down one decimal, yet the median FOMC rate forecast for 2024 moved higher by half a percent.
MORENA party’s candidate, Claudia Sheinbaum, won the Mexican presidential election with a historic margin, receiving 60% of votes. This victory was anticipated, but the scale of left-leaning MORENA's win in Congress was unexpected.
For three years, stock and bond returns have been moving in the same direction. When times are good, this is not thought of as a problem; however, when stocks sell off and bonds are not there to catch them, then investors are faced with an important portfolio construction challenge to solve.
The U.S. is the largest equity market in the world, but its weighting in the MSCI AC World Index exceeds its global equity market weighting and its projected contribution to global GDP in 2023.
While we don’t expect home prices to decline materially from here given structural dynamics, Americans that have been sidelined from being able to purchase a home over the past couple of years are perhaps hoping and waiting for at least one area of reprieve: lower mortgage rates.
If 2023 was the year for AI excitement, this year may be the year for deployment. In first quarter earnings calls, approximately 45% of S&P 500 companies mentioned AI, marking a fresh high by our measures, and their collective investments continue to climb.
Within that “super core” index, one small category (only 3% of the overall CPI basket) has been making outsized contributions: auto insurance.
2023 marked a third consecutive year of double-digit declines for Chinese equity markets. Investors are now reconsidering how to invest in that market and whether investing in Asia is about more than just China.
To understand these shifting dynamics and determine how to embrace this growing asset class, investors should consider: What’s driving the growth of private credit and the decline in high yield and, if private credit deserves a strategic allocation in a broader credit portfolio?
Following the pandemic, median home prices surged by double digits until peaking at the end of 2022. While prices are down roughly 12% since then, home affordability still sits at multi-decade lows.
During the first quarter, U.S. equities shrugged off ever-changing expectations for monetary policy with relative ease, climbing 10.6% despite a sharp hawkish repricing in policy expectations.
At its May meeting, the Federal Open Market Committee (FOMC) voted to leave the Federal funds rate unchanged at a target range of 5.25%-5.50%.
Sticky price pressures pose a challenge for the data-dependent Fed, casting doubt on the possibility of any rate cuts this year.
Investors should consider trimming decade-long international equity underweights – and Asia is the key place to look for opportunities.
Private equity has been surprisingly resilient throughout the Fed hiking cycle. In 2022, PE only declined by 2%, but is now 3.2% higher than the end of 2021, compared to U.S. small cap stocks, which were 7% lower.
It’s well understood that consumption is the largest contributor to economic growth in the United States accounting for just under 70% of GDP. Therefore, to a large extent, any outlook on the economy hinges on the health of the consumer.
Investors should recognize that while geopolitical headlines have the ability to capture market attention, the shocks to sentiment are often short-lived.
Well-positioned investors could take advantage of the new era unfolding in healthcare transformation.
We expect yields to stabilize in the near term and for spreads to remain tight given still healthy credit fundamentals and strong economic activity.
2023’s so-called “everything rally” was confusing to many market watchers, given the pessimistic macro outlook at the beginning of last year. Now, a quarter into 2024, the rally has clearly continued.
The S&P 500 notched 24 new all-time highs in Q1, up 10.6%, with 2.7%-points from earnings, 7.4% from multiple expansion, and 0.4% from dividends.
While we don’t expect a recession this year, whenever one occurs, the lack of private sector imbalances suggest that it is unlikely to be a severe one.
Investors should focus on EM regions and sectors that benefit from structural, as well cyclical, tailwinds.
As widely anticipated, the Federal Open Market Committee (FOMC) voted to leave the Federal funds rate unchanged at a target range of 5.25%-5.50% at its March meeting.
Cryptocurrency investments should be made cautiously, and only as part of a much larger diversified portfolio of stocks and bonds. For investors with a long time horizon, traditional asset allocation remains an effective strategy.
For investors looking to diversify concentration to U.S. tech names or to lean into underappreciated AI opportunities, Asian high-quality technology stocks could provide an attractive opportunity set.
Despite causing some short-term profit taking, gradual Yen strength can be digested by equities. Japan finally deserves to retake its place as a strategic allocation in global equity portfolios.
The financial future for women looks promising, but for individual investors, a strong financial plan will be key in seizing the opportunity.
After a significant pricing reset, private real estate could be on the verge of a rebound due to a few key drivers.
With monetary policy still at the forefront of the macro landscape in 2024, investors are left wondering how the election might influence Fed policymakers.
Investors should recognize that the challenging backdrop presents an opportunity for alpha generation, both through traditional security selection and through active tax management
For over a year, investors have been hyper-focused on the performance of just seven U.S. companies, nicknamed the “Magnificent 7”*, and rightfully so, given their outsized returns, earnings growth, and long-term tailwinds.
Over the last 30 years, cash has been unable to keep up with the creep of inflation. By contrast, other investments have been much better places to park capital.
Presidential candidates will be campaigning on various policy proposals throughout the year, but one policy item that must be addressed during the next administration is whether to sunset or extend tax cuts from the 2017 Tax Cuts and Jobs Act.
The S&P 500 has reached a new milestone: crossing 5000. It is up 5.4% year-to-date, compared to the equal weight S&P 500, up just 0.7%.
While recession risks in the US have receded, geopolitical risk, election risk and restrictive monetary policy all threaten the current rally.
As the Year of the Dragon is about to begin in China, investors wonder: Are Chinese equity valuations cheap enough to bring good fortune ahead? What will turn investor sentiment around? Equity valuations already reflect a lot of uncertainty about the short-term and long-term path, suggesting a tactical rebound may be in the cards.
At the first Federal Open Market Committee (FOMC) meeting of the year, the FOMC voted to leave the Federal funds rate unchanged at a target range of 5.25%-5.50%.
Markets achieved a trifecta of good news in 2023: an economy that not only avoided recession but reaccelerated, meaningful progress on disinflation, and the Fed pivot markets had been trying to manifest for over a year.
Geopolitical uncertainty and an impending U.S. presidential election, coupled with the divergence in performance across assets in January, help to underline the importance of diversification in a fundamentally uncertain world.
Last quarter, 40% of S&P 500 companies mentioned artificial intelligence (AI) in their earnings calls – more than double from a year earlier – and their collective investments in AI are exploding.
As we emerge from this pandemic with inflation now rising at its fastest pace since the 1980s, the biggest question for investors is whether some of this inflation will prove “sticky”.
Mexico and Canada took the spotlight this week after President Trump announced plans to impose 25% tariffs on its USMCA partners starting February 1st., as well as an investigation into unfair trade practices by China and others.
High hopes for the U.S. equity market this year are underpinned by expectations of robust corporate profits, and early indications of 4Q24 earnings have not disappointed.
Natural disasters impose severe hardships on families and communities, and our thoughts are with those affected by the wildfires in Southern California.
Over the past two years, healthcare stocks have experienced significant outflows and underperformance relative to the broader market, despite positive catalysts like innovation and weight-loss drugs.
The spread between the 3-month U.S. Treasury bill yield and the 10-year U.S. Treasury yield, commonly referred to as the yield curve spread, is a vital indicator in financial markets and is closely monitored by investors and the Federal Reserve, particularly given the historical efficacy of its inversion predicting U.S. recessions.
2024 was a busy year. Global economic growth diverged amidst elevated uncertainty; nearly half of the world's population went to the polls, igniting debates around policy; inflation eased across major economies, with policymakers seemingly successful in engineering a "soft landing"; and risk assets performed well, though the dispersion of returns across asset classes widened.
The U.S. dollar has continued to defy gravity, rising 7% in 2024 despite two Fed rate cuts. While the DXY Index peaked in September 2022, the U.S. real broad effective exchange rate (REER), which measures the dollar’s value relative to a broad basket of currencies adjusted for inflation differentials, remains near all-time highs.
To conclude the year, tariffs have once again become a focal point, with Google searches for the term spiking in November and December.
At its final meeting, the Federal Open Market Committee (FOMC) voted to reduce the Federal funds rate by 0.25% to a target range of 4.25%-4.50%, cutting rates by a 100 basis points (bps) or 300bps annualized in 2024.
As Paul Krugman famously stated in 1990, “Productivity isn’t everything, but in the long run it is almost everything.” By boosting productivity, an economy can enhance its standard of living by producing more with the same or fewer resources. In essence, productivity is a key driver of economic prosperity.
Today, investors are trying to understand the “series of tubes” that enable artificial intelligence. Behind every interaction with an AI tool is not only a complex web of digital neural networks, but also a humming physical network of data centers, electricity lines and power plants.
The alternative investment landscape often evolves gradually. Assets may be priced infrequently and therefore are less sensitive to day-to-day market moves.
Bitcoin has staged a remarkable rally this year, doubling in price to nearly $100,000. As of today, it is near an all-time high.
The dominance of Big Tech in digital services has enabled them to scale and grow in unprecedented ways, but has also raised concerns about their expanding power.
Former Federal Reserve (Fed) Chair Janet Yellen described the first episode of balance sheet drawdown from 2017-2019 to be “like watching paint dry”.
Today’s economic environment differs meaningfully from 2018—while the inflation heatwave is mostly past us, its embers are still alive.
In 2018, the U.S. corporate tax rate was slashed from 35% to 21% when the 2017 Tax Cuts and Jobs Act (TCJA) went into effect. On the campaign trail, President-elect Trump proposed a further reduction from 21% to 15%, specifying this would apply to companies that make their products in America.
With the U.S. election results settled, investors are now evaluating the economic policy implications. U.S. risk assets are buoyed by the ongoing soft landing and prospects of deregulation and lower corporate taxes.
In its penultimate meeting of 2024, the Federal Open Market Committee (FOMC) unanimously voted to lower the federal funds rate by 25 basis points to a target range of 4.50%-4.75%.
Former President Trump has been declared the winner of the U.S. Presidential election, securing the Electoral College and likely the popular vote. Republicans regained control of the Senate and are expected to gain control of the House as well.
Since the Fed’s jumbo 50 basis point rate cut in September, U.S. 2-year and 10-year Treasury yield have risen by 54bps and 59bps to 4.15% and 4.29%, respectively.
With the U.S. elections just a week away and polls indicating a tight race, investors are closely assessing potential impacts for currency markets.
If the U.S. economy were a pop star, it might be peak Taylor Swift. On nearly every major measure of economic health, the economy is in great shape and far ahead of its developed market peers.
Housing inventories remain near record lows, yet builders are not increasing construction volumes enough to sufficiently meet demand. Why aren't builders ramping up activity?
The combination of the stimulus announcement plus cheap valuations and underweight positions resulted in a surge in net flows into Chinese equities summing up to $12.7 billion from September 24th to October 14th.
The American consumer has been resilient in the face of significant headwinds, helping keep the U.S. economy afloat and increasing the likelihood of a "soft landing". However, while aggregate consumption has remained robust, the way the consumer is spending across categories has changed since the start of 2020.
Recent years have seen a significant acceleration in clean energy investment and grid decarbonization alongside the implementation of the Inflation Reduction Act passed in August 2022.
After retracing 8.5% by early August, the S&P 500 had just about fully recovered by the end of the month, and subsequently powered to new highs after the Federal Reserve delivered a jumbo 50 basis point rate cut.
Chinese equities had a spectacular end to September, with the MSCI China up 21% from September 24th to 30th. The catalyst was the announcement of a series of economic stimulus measures focused on the housing market, domestic consumption, and the stock market.
Utilities have traditionally been known for their defensive properties, which makes the combination of robust economic growth, technological excitement and elevated bond yields an unlikely recipe for their outperformance.
Utilities have traditionally been known for their defensive properties, which makes the combination of robust economic growth, technological excitement and elevated bond yields an unlikely recipe for their outperformance.
Emerging market equities sold off along with other markets in early August. However, they have since rebounded 8%, bringing YTD performance to 11%. While China lags due to ongoing economic challenges, recent developments have sparked a small recovery.
The relative strength and direction of the U.S. dollar matters: trade balances can fluctuate, multinational corporations can see foreign sales rise or fall and U.S. dollar-denominated investors in international markets can see returns amplified or diminished.
In a highly anticipated decision, the FOMC voted to lower the federal funds rate by 50 basis points to a target range of 4.75%-5.00%, a larger-than-expected move and their first move lower since March 2020.
The change is most evident in international trade data. China's share of U.S. imports peaked at 22% in 2018 during the U.S.-China trade conflicts and sits at 11.5% as of June 2024.
The August CPI report showed further progress in inflation making its way down to 2%, setting the Fed up to begin normalizing monetary policy next week with a quarter point rate cut.
In this piece, we compare the proposals of Vice-President Harris and former President Trump across taxes, trade and immigration, and the potential market implications of different election outcomes.
Elevated public market valuations, historically low bond yields and positive stock-bond correlation are all challenges facing the traditional 60/40 portfolio. Moving forward, investors may need to rely on alternative asset allocations to enhance return, income, and diversification in their portfolios.
“The time has come” was a memorable phrase from Chair Powell’s speech at the Jackson Hole Symposium last week. After a few false dawns this year, Federal Reserve rate cuts are imminent, with the discussion now shifting to how quickly rates will come down.
Interest rate expectations have changed wildly since the start of the year. While these expectations will continue to evolve as new data are released, one thing seems clear: the Federal Reserve will begin its rate cutting cycle this year, and it will cut by more in 2024 than it had previously telegraphed.
Markets have largely rebounded from the volatility of the past two weeks. The S&P 500 has recovered 3.0% after a 4.8% decline, U.S. Growth equities have risen 4.3% following a 5.5% drop, and the VIX has settled at 20.7, after spiking to 55.1, its highest level since March 2020.
Large moves were seen in Japanese markets, which dropped 6% on Friday (8/2) and another 12% on Monday (8/5), marking the worst daily sell-off since 1987.
The Federal Open Market Committee (FOMC) voted to leave the Federal funds rate unchanged at a target range of 5.25%-5.50%, but hinted rate cuts are on the horizon.
Mega-cap tech has enjoyed a long winning streak, but the stars recently began to align for the underdogs to take the lead.
With the U.S. election approaching, potential U.S. policy changes are a key concern for global investors. After most U.S. elections, the MSCI EM Index has had positive performance in the 100 days following.
Later this month will mark a year since the last rate hike from the Federal Reserve (Fed). Historically, the end of a hiking cycle should have been an opportune time to extend duration by deploying cash into high quality intermediate fixed income securities.
While French politics are somewhat unique, the New Popular Front’s victory is the second win for a left-wing party so far this month after a strong defeat of the Conservatives in the UK.
Looking to the back half of the year and beyond, lingering geopolitical uncertainty and an upcoming U.S. presidential election, coupled with the divergence in performance across assets, underscores the importance of diversification in a fundamentally uncertain world.
The “Magnificent 7” has massively outperformed the rest of the market, up roughly 30% since the start of the year compared to around 5% for the remaining companies, on AI-related headlines and strong earnings growth.
Markets have a tendency to over appreciate the near term and under appreciate the long term. We think AI will lead to all sorts of business transformation and productivity gains in the long term, but recent performance has been driven by significant upgrades in near-term AI demand projections.
The average homeowners’ insurance policy cost roughly $1,900 in 2023, up over 20% from the previous year and nearly 50% from before the pandemic.
In the May CPI report, year-over-year headline inflation cooled to 3.3% from 3.4% - down one decimal, yet the median FOMC rate forecast for 2024 moved higher by half a percent.
MORENA party’s candidate, Claudia Sheinbaum, won the Mexican presidential election with a historic margin, receiving 60% of votes. This victory was anticipated, but the scale of left-leaning MORENA's win in Congress was unexpected.
For three years, stock and bond returns have been moving in the same direction. When times are good, this is not thought of as a problem; however, when stocks sell off and bonds are not there to catch them, then investors are faced with an important portfolio construction challenge to solve.
The U.S. is the largest equity market in the world, but its weighting in the MSCI AC World Index exceeds its global equity market weighting and its projected contribution to global GDP in 2023.
While we don’t expect home prices to decline materially from here given structural dynamics, Americans that have been sidelined from being able to purchase a home over the past couple of years are perhaps hoping and waiting for at least one area of reprieve: lower mortgage rates.
If 2023 was the year for AI excitement, this year may be the year for deployment. In first quarter earnings calls, approximately 45% of S&P 500 companies mentioned AI, marking a fresh high by our measures, and their collective investments continue to climb.
Within that “super core” index, one small category (only 3% of the overall CPI basket) has been making outsized contributions: auto insurance.
2023 marked a third consecutive year of double-digit declines for Chinese equity markets. Investors are now reconsidering how to invest in that market and whether investing in Asia is about more than just China.
To understand these shifting dynamics and determine how to embrace this growing asset class, investors should consider: What’s driving the growth of private credit and the decline in high yield and, if private credit deserves a strategic allocation in a broader credit portfolio?
Following the pandemic, median home prices surged by double digits until peaking at the end of 2022. While prices are down roughly 12% since then, home affordability still sits at multi-decade lows.
At its May meeting, the Federal Open Market Committee (FOMC) voted to leave the Federal funds rate unchanged at a target range of 5.25%-5.50%.
Sticky price pressures pose a challenge for the data-dependent Fed, casting doubt on the possibility of any rate cuts this year.
Investors should consider trimming decade-long international equity underweights – and Asia is the key place to look for opportunities.
Private equity has been surprisingly resilient throughout the Fed hiking cycle. In 2022, PE only declined by 2%, but is now 3.2% higher than the end of 2021, compared to U.S. small cap stocks, which were 7% lower.
It’s well understood that consumption is the largest contributor to economic growth in the United States accounting for just under 70% of GDP. Therefore, to a large extent, any outlook on the economy hinges on the health of the consumer.
Investors should recognize that while geopolitical headlines have the ability to capture market attention, the shocks to sentiment are often short-lived.
Well-positioned investors could take advantage of the new era unfolding in healthcare transformation.
We expect yields to stabilize in the near term and for spreads to remain tight given still healthy credit fundamentals and strong economic activity.
2023’s so-called “everything rally” was confusing to many market watchers, given the pessimistic macro outlook at the beginning of last year. Now, a quarter into 2024, the rally has clearly continued.
The S&P 500 notched 24 new all-time highs in Q1, up 10.6%, with 2.7%-points from earnings, 7.4% from multiple expansion, and 0.4% from dividends.
While we don’t expect a recession this year, whenever one occurs, the lack of private sector imbalances suggest that it is unlikely to be a severe one.
Investors should focus on EM regions and sectors that benefit from structural, as well cyclical, tailwinds.
As widely anticipated, the Federal Open Market Committee (FOMC) voted to leave the Federal funds rate unchanged at a target range of 5.25%-5.50% at its March meeting.
Cryptocurrency investments should be made cautiously, and only as part of a much larger diversified portfolio of stocks and bonds. For investors with a long time horizon, traditional asset allocation remains an effective strategy.
For investors looking to diversify concentration to U.S. tech names or to lean into underappreciated AI opportunities, Asian high-quality technology stocks could provide an attractive opportunity set.
Despite causing some short-term profit taking, gradual Yen strength can be digested by equities. Japan finally deserves to retake its place as a strategic allocation in global equity portfolios.
The financial future for women looks promising, but for individual investors, a strong financial plan will be key in seizing the opportunity.
After a significant pricing reset, private real estate could be on the verge of a rebound due to a few key drivers.
With monetary policy still at the forefront of the macro landscape in 2024, investors are left wondering how the election might influence Fed policymakers.
Investors should recognize that the challenging backdrop presents an opportunity for alpha generation, both through traditional security selection and through active tax management
For over a year, investors have been hyper-focused on the performance of just seven U.S. companies, nicknamed the “Magnificent 7”*, and rightfully so, given their outsized returns, earnings growth, and long-term tailwinds.
Over the last 30 years, cash has been unable to keep up with the creep of inflation. By contrast, other investments have been much better places to park capital.
Presidential candidates will be campaigning on various policy proposals throughout the year, but one policy item that must be addressed during the next administration is whether to sunset or extend tax cuts from the 2017 Tax Cuts and Jobs Act.
The S&P 500 has reached a new milestone: crossing 5000. It is up 5.4% year-to-date, compared to the equal weight S&P 500, up just 0.7%.
While recession risks in the US have receded, geopolitical risk, election risk and restrictive monetary policy all threaten the current rally.
As the Year of the Dragon is about to begin in China, investors wonder: Are Chinese equity valuations cheap enough to bring good fortune ahead? What will turn investor sentiment around? Equity valuations already reflect a lot of uncertainty about the short-term and long-term path, suggesting a tactical rebound may be in the cards.
At the first Federal Open Market Committee (FOMC) meeting of the year, the FOMC voted to leave the Federal funds rate unchanged at a target range of 5.25%-5.50%.
Geopolitical uncertainty and an impending U.S. presidential election, coupled with the divergence in performance across assets in January, help to underline the importance of diversification in a fundamentally uncertain world.
See the potential impact that various recovery scenarios may have on client portfolios.
