Last Month at a Glance
Global equities rose in May, boosted by artificial intelligence (AI) earnings momentum and hopes for an extension of the US-Iran ceasefire.
Credit/Fixed Income
Last Week at a Glance
Global equities sold off late last week amid rising bond yields and inflation concerns tied to the ongoing closure of the Strait of Hormuz.
The Economy, Not Kevin Warsh, Will Drive Fed Policy
Kevin Warsh became chair of the Federal Reserve on May 15. His appointment is unlikely to drive a major near-term policy shift.
UK Political Turmoil Adds Noise, But Gilts Will Remain Driven By Broader Macro Forces
Large losses in last weekend’s local elections have increased pressure on Labour Party leader and Prime Minister Keir Starmer. Frustration was already building within the Labour Party over the lack of visible progress on key priorities, compounded by weak approval ratings.
VantagePoint: The Rearview Mirror Problem
The conditions that rewarded concentrated exposure to US growth and technology stocks for much of the past decade are becoming less dependable. With valuations stretched and macro and geopolitical risks less benign, investors may be better served by reducing crowded exposures and rebuilding diversification across a broader set of opportunities.
A New Era of Dispersion in Direct Lending Favors Disciplined Managers
Direct lending has attracted significant institutional capital over the past decade, but that environment is now changing. In a more challenging landscape, we expect performance dispersion to emerge more clearly between managers, reinforcing the importance of manager selection and taking a diversified approach across strategies, geographies, and borrower segments.
US Private Families Should Revisit How Munis Fit Within a Broader Diversification Strategy
We believe US private families should continue to anchor the portion of the portfolio intended to diversify equity risk with munis, while being more selective about allocations to cash, Treasuries, and other taxable fixed income, given the shift in after-tax trade-offs.
Will the Iran War Force the ECB and BOE to Tighten as Much as Markets Expect?
No, we do not think so. While the European Central Bank and Bank of England have adopted a more hawkish tone in response to the Iran-driven energy shock, we believe markets are overpricing the amount of tightening that will ultimately be delivered.
Last Quarter at a Glance
Global equities declined in first quarter as early gains reversed sharply in March following the outbreak of the Iran War and the associated energy shock.
The Iran War: Impact on Energy, Inflation, and Markets
The war in Iran has triggered a historic disruption in the Strait of Hormuz, driving oil & gas prices higher and exposing vulnerable energy-importing regions. This shock is fueling concerns over higher inflation and rising bond yields, creating a volatile environment where commodities lead while global equities and traditional bond diversifiers underperform.