We entered 2023 with a view that a recession in some economies, namely the United States and much of Europe, was likely this year, and the recent banking sector stresses reinforce our confidence in this view. Investors should be disciplined in maintaining policy targets broadly, remembering the role allocations to stocks, bonds, and cash play in portfolios.
Risk assets continued to rebound in first quarter, led by global equities, which have gained 15% since their recent trough last October.
The current market turmoil has created an attractive environment for direct lenders. The dislocation in the public markets has driven borrowers to private lenders that can demand better pricing and lender-friendly terms. As a floating-rate asset, lenders are benefiting from the sharp increase in rates and all-in yields are in the low double digits.
The 2022 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.
On 20 March, investors awoke to news Swiss authorities had used emergency measures to push through a hastily arranged merger of Credit Suisse and UBS. Following two recent bank failures in the United States, the announcement raised questions over the health of European banks and the broader economy.
In more uncertain investment environments, pension plan sponsors should remember that down markets can create value opportunities for well diversified portfolios. This paper discusses how recent developments in the fixed income market may be able to help total return-seeking pension plan portfolios, frozen plans looking to de-risk, and open or recently closed pension plan portfolios.
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.
The 2022 US 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.
New Zealand markets had difficulty gaining ground in 2022, although they still demonstrated greater resilience than many of their global counterparts. For 2023, the weakening outlook for domestic growth and the prospect of more restrictive interest rates remain key risks to New Zealand market performance.
Risk assets broadly declined in February, reversing some of the rally from the last several months.