Market Matters: October 31, 2023
Risk assets broadly declined in October.
Credit/Fixed Income
US Manager Universe Statistics: Second Quarter 2023
This publication presents manager performance for 37 asset classes and substrategies, showing the median, mean, and key percentiles of return. Relevant indexes for each asset class are also included to provide market context.
Israel-Hamas War Highlights the Importance of Diversification
The devastating loss of life resulting from Hamas’s surprise attack on Israel is at the forefront of our concerns. Risk of a prolonged conflict in the region has grown, creating a new layer of uncertainty on many fronts, including the global economy and markets.
Should Taxable Investors Still Rely on Municipal Bonds to Boost After-Tax Returns?
Yes. Municipal (muni) bonds have recently outperformed taxable equivalents before taxes and the tax advantage of high-quality munis has grown as interest rates have gone up. We recommend a neutral allocation to high-quality munis in taxable portfolios.
Market Matters: September 30, 2023
Risk assets generally declined in Q3 as rising bond yields pressured fixed income and equity performance alike.
Key Central Bank Policy Rates Approach Cyclical Peak
Over the past two weeks, central banks in the United States, United Kingdom, euro area, and Japan have all held monetary policy meetings. The communications following these meetings retained a hawkish bias, suggesting further policy tightening may be necessary—except for the Bank of Japan—however, additional interest rate hikes will likely be much less frequent for the remainder of this cycle. Despite this reality, we do not think major central banks will be quick to cut interest rates next year.
Market Matters: August 31, 2023
Most asset classes declined in August as higher bond yields and mixed economic signals weighed on risk appetite.
Review of Market Performance: Fiscal Year 2023
Risk assets enjoyed mostly positive returns in fiscal year 2023. Equities rebounded as fears over the severity of a possible recession moderated. Emerging markets equities lagged developed markets as the pace of reopening in China disappointed. Bond performance improved as credit assets posted positive returns but developed markets sovereign bonds struggled. Real assets suffered due to higher interest rates and slowing demand.
Does Fitch’s Recent Ratings Downgrade of US Sovereign Debt Change Our View on Treasuries?
No, we continue to believe investors should hold US Treasuries in line with policy allocations. While the recent decision by Fitch Ratings to downgrade the sovereign credit rating of the United States added upward pressure on Treasury yields, we do not expect it will have a lasting impact.
Credit Score: Why Bank Retrenchment Spells Opportunity for Pensions
Banking sector challenges have helped to establish private lenders as main sources of capital to mid-market and large companies and created a range of private credit investment opportunities for pension plan sponsors, which requires thoughtful portfolio construction when implementing these strategies in an uncertain market environment.