No. We continue to think investors should tightly manage risk by keeping equity allocations and bond duration in line with broad policy targets and resist the temptation to time the market.
No, while the recent outperformance and positivity surrounding Eurozone equities was justified by shifts in the macroeconomic landscape, we do not have confidence that outperformance will continue, given the challenges still facing the region. Therefore, we suggest investors keep Eurozone equity allocations in line with policy weights.
Calendar year 2022 witnessed multi-decade record inflation and central banks responded with rapidly tightening monetary policy. Rising rates saw the correlation between bonds and equities turn positive, contributing to large declines across most asset classes. Funds flows diverted away from growth and momentum strategies, and yield curves flattened with the ten-year/two-year yield curve becoming inverted in most developed markets, signaling economic uncertainty ahead.
We expect the US dollar to remain firm but with limited appreciation relative to 2022, given our view that it is near the end of its incredible multi-year run. We believe gold’s performance will improve and digital assets, in general, will not surpass prior highs, many of which were set in 2021.
We expect most investors should maintain equity allocations in line with policy targets. Consistent with this idea, we believe investors with portfolios that are more diversified across risk exposures will tend to fare better than investors holding more correlated investments.
Yes. The hawkish Federal Reserve and energy market challenges have contributed to a strengthening of the US dollar in recent quarters, and we expect that trends in both factors may continue to be supportive of the dollar in the short term. Nonetheless, on a longer horizon, historical precedents suggest that the dollar is approaching the end of a multiyear bull run.
Currently, there is an active debate about whether the United States is in a recession. Two quarters of negative GDP fits one definition of a recession; however, the National Bureau of Economic Research looks at a greater expanse of data before making its assessment. In this note, we examine some of this data, dig into other line items in the national accounts, and look at historical trends in employment around recessions to further our understanding and put today’s labor market into context.
Fiscal year 2022 was a challenging one for public market investments. Rising levels of inflation across most developed and emerging markets saw central banks become more aggressive in their monetary tightening plans. This in turn saw correlations between bonds and equities become positive; bonds declined as a direct result of higher inflation and tighter policy, while equities weakened in response to the higher cost of capital. This chart book presents returns and other market metrics for fiscal year 2022.
The European Central Bank raised its policy rates by 50 basis points, including its deposit rate, which is now 0%, to address high inflation levels in the bloc.
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.