Credit/Fixed Income

Market Matters: May 31, 2022

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Risk assets continued their bumpy ride in May as investors attempted to discount a shifting economic narrative. Still, global equities posted only minor declines in local currency terms despite a meaningful increase in volatility. Value topped growth for the fourth time this year, while large caps outperformed small caps. Investment-grade bonds advanced as US Treasury yields mostly fell, whereas European government bond yields continued climbing across maturities. Commodities rose, driven by higher energy prices, while other real assets were mixed. The US dollar and UK sterling weakened, while the euro broadly gained on expectations of tighter monetary policy.

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.

War in Ukraine Dents European Growth Prospects

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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.

VantagePoint: Resilience in a Time of Uncertainty

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Global inflation has been higher and more persistent than most economists anticipated. In this edition of VantagePoint, we evaluate current inflationary and deflationary crosscurrents and the implications for investors. We continue to believe that predicting the future path of inflation is difficult to do well and that the best protection is a well-constructed diversified portfolio designed to meet the asset owner’s risk tolerance, portfolio objectives, and spending needs.

Decades of Data: Emerging Markets 1987–2021

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The 2021 Emerging Markets edition of our annual report on the history of financial markets provides context for the range of returns investors can expect from equities, bonds, and cash; reveals the importance of various components of equity returns; examines the evidence for equity mean reversion; and reviews the relationship between initial valuations and subsequent returns for equities and bonds.

Decades of Data: Europe ex UK 1900–2021

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The 2021 Europe ex UK edition of our annual report on the history of financial markets provides context for the range of returns investors can expect from equities, bonds, and cash; reveals the importance of various components of equity returns; examines the evidence for equity mean reversion; and reviews the relationship between initial valuations and subsequent returns for equities and bonds.