Fed Tightens by 0.75% and Projects Softer Economy
The Federal Reserve announced that it was raising the target range for the Fed funds rate by 75 basis points to 1.50%–1.75% and made wholesale changes to its summary of economic projections.
Research Publications Archive
Small-Cap Stocks Present Large Opportunity
US small-cap stocks have underperformed large-cap peers in recent years, opening a significant valuation discount that seems hard to justify based on relative earnings strength or balance sheet health. The sector exposure of small-cap stocks may make them better positioned for the current environment of rising interest rates and high commodity prices. While small caps should always be a part of investors’ tool kits, now is an especially opportune time to add exposure, given historically low valuations.
Are Global Corporate Earnings Expectations Too Lofty?
Yes, we think corporate earnings expectations are likely too high. This is because earnings are well above the long-term trend, and we expect inflation and higher policy rates will put downward pressure on profits margins.
Emerging Markets Equity Manager Performance: 2021
On a median basis, active managers declined but held up better than the MSCI Emerging Markets Index. This chart book is our annual summary of the absolute and relative performance of managers that report to our database.
Global Equity Manager Performance: 2021
The vast majority of active managers underperformed the index in 2021—the worst year for active global equities managers we have on record. This chart book is our annual summary of the absolute and relative performance of managers that report to our database.
Global ex US Equity Manager Performance: 2021
This chart book is our annual summary of the absolute and relative performance of managers that report to our database.
Credit Investors Should Proceed Cautiously
Credit assets have sold off in recent weeks in unison with other risk assets, as market concern has shifted from one extreme of growth and inflation running too hot to another of stagflation, or even outright recession. Despite the improvement in credit pricing, we believe investors should be patient when adding to high-beta credit portfolios.
Are Venture Returns About to Cycle?
Yes. We do expect venture capital (VC) returns to be negatively impacted in the coming quarters but doubt that impact will be as pronounced and wholesale as it was during the dot-com era.
War in Ukraine Dents European Growth Prospects
The ongoing war in Ukraine has exerted a material impact on both global economies and markets, primarily via a steep increase in commodity prices, especially energy. Europe has been particularly affected due to its geographical proximity and the resultant dependence of many of its nations on Russian fossil fuels. This chart book reviews the hit to European growth associated with the war in Ukraine.
Can Commodities Still Provide Shelter in the Storm as Both Stocks and Bonds Suffer Losses?
Yes, although such investments are not for the faint of heart. As we have seen in 2022, both stocks and bonds have lost value as inflation expectations have escalated.