The Inflation Inflection
Equities: Pricing Power and Renewed Focus on Yield
Economic and Market Review: Continue to Recommend Defensive Positioning, Focus on Quality
What happens when the lowest interest rates in 400 years meet the fastest hikes in 100?
Politics, Deficits and the Debt Limit
We firmly believe that Congress will ultimately raise the debt limit, but it’s worth remembering that political drama affects markets.
A Delayed Reckoning
Equity markets had momentum coming into 2023, but has the economic data now become too bad for investors to ignore?
Economic and Market Review: Key Considerations For Equity Investors
After rising interest rates, persistent inflation and geopolitical turmoil pounded equity investors in 2022, we believe macroeconomic indicators offer equity investors little to cheer about in the first quarter of 2023.
A Tale of Two Cities
Why we think the resilience of the U.S. economy is proving to be a real conundrum for investors.
Economic and Market Review: Key Considerations for Equity Investors
We put out a cautious Equity Market Outlook three months ago, and after a quarter of worsening economic data and inflation trends we are now even more focused on low beta and high earnings quality.
Value, Growth and the True Exposures in Your Portfolio
If your portfolio has fallen more heavily than you anticipated this year, it may be because it has become biased to growth stocks: a full analysis could help restore the balance—and the exposure to a more disciplined style of value investing—you intended.
Economic and Market Review: Key Considerations for Equity Investors
We see increasing likelihood of a recession, but even if we avoid one, we think the coming months are going to feel like a recession as the decline in stock market valuations in the first half of the year are likely followed by a decline in corporate earnings in the second half.
Earnings at a Crossroads
The guidance in this season’s earnings reports could start to tell us how far earnings are likely to decline and how much is already priced in.
Into the Inflationary Slowdown
As inflation persists and recession risks rise, our Asset Allocation Committee sees more yield potential in fixed income and favors commodities for ongoing inflation exposure, but remains cautious in equities.
Descending From Extremes Is a Rocky Process
To understand the current volatility, it helps to get reacquainted with just how out of whack things were coming into 2022—in terms of both magnitude and timing.
Are We There Yet?
Regardless of whether we get a hard or soft landing, we likely face a steep approach to the runway in trying to “land this plane.” The question is, how well consumers and companies absorb the slowdown, and whether sentiment is already bearish enough to create long-term value.
Japan: Land of the Rising Prices?
Japan looks set to emerge from 30 years of near-zero inflation in 2022—but are its companies able to absorb higher costs, or even re-learn the art of passing price hikes on to their customers?
Regime Change
While we do not anticipate a recession over the next 12 months, the prospect of slowing growth and stubborn inflation has led us to downgrade our view on equities, and prepare for a new regime in which real assets could generally perform better than financial assets such as stocks and bonds.
Economic and Market Review: Key Considerations for Equity Investors
We believe the conflict in Ukraine may turn out to be less critical for equity markets than the upcoming turn we anticipate in the economic growth cycle.
REITs as a Hedge Against Inflation
Real estate investment trusts across a number of sectors could show strength in 2022, driven by inflation and secular trends.
Large Cap Value, Inflation Fighter
Large-cap value stocks have characteristics that could make them compelling in the current environment and beyond.
War, Inflation, and Markets
Investors appear to be refocusing on pre-war concerns about economic fundamentals—but finding that this horrific conflict has exacerbated them.
Solving for a Year of Inflections
The Solving for 2022 delegates voted on what they think will be this year’s best-performing investment category—and here’s why we think they are right.
Economic and Market Review: Key Considerations for Equity Investors
We believe positive fundamentals are likely to outweigh pandemic, valuation and slowdown concerns in the first half of 2022.
2022: A Year of Major Inflection Points
These five big transitions are likely to make 2022 a choppy and challenging year for equity investors—and the end of the coronavirus pandemic doesn’t even make the cut.
Hike Rates and Carry On
A positive economic outlook makes the case for holding risky assets through 2022, in our view, but higher rates are likely to mean higher volatility: we therefore favor a focus on income or “carry” from risky assets, alongside strategies with the potential to withstand price volatility.
The Most Important Rate in the Whole Wide World
Markets may be missing the importance of record-low real rates, and the potential impact if they start to rise.
The Fight Against Inflation Has Begun
We think that inflation, central bank policy and real rates will define the battlefield for markets in 2022—but will the most volatile skirmishes come sooner or later in the year?
Omicron vs. the Fed
The volatility of the past two weeks may have had less to do with the virus and more to do with underlying cyclical uncertainties about growth, inflation and Fed policy.
Real Rates Are the Key to This Cycle
Most of the consensus trades for 2021 failed in the second half of the year, and we think understanding why could be critical to unlocking the rest of this unique cycle.
Inflation Could Unbalance Policy and Portfolios
As inflation pressures build and investors question central bank policies, we think it’s increasingly important to diversify against market volatility and rising prices.
Clearing the Hurdles
On a 12-month horizon, this looks to us like an attractive environment for risky assets, but the inflection point in the current cycle is proving particularly volatile: adopting a more defensive view in the short term could help investors clear the immediate hurdles.
Caution Today, Opportunity Tomorrow
We think a more cautious stance represents a prudent approach to an already volatile inflection point between early-cycle recovery and mid-cycle expansion.
All for One, One for All
Available data suggests that a balanced risk allocation to real assets may be the most robust way to mitigate the impact of upticks in inflation.
Reconciling the Data and the Markets
Inflation is up, Treasury yields are down, and the recovery trade is on the ropes—we believe it’s all more evidence of a fiercely debating, two-way market.
From Hanging Ten to Choppy Waves
Does a change in the weather forecast at the Federal Reserve signal an end to the early stage of this recovery cycle?
Commodities: Equities or Futures?
As more investors turn their focus back to commodities, it is worth remembering that commodity equities have historically generated surprisingly poor commodity exposure relative to more direct investments.
Two-Way Markets Are Back
After nearly a year going up in a straight line, questions about inflation, the economic cycle and central bank messaging have brought more push and pull back into markets.
The Great Reset: Rethinking Globalization
In the first of our conversations about the post-pandemic landscape, Erik Knutzen spoke with economist Nancy Lazar about the future of globalization.
Roaring Twenties, or Back to the Late Teens?
This is a truly singular global recession and recovery, and it makes portfolio diversification both vital and challenging.
Jobs, Inflation and Market Volatility
This year’s inflation surprises are likely to create volatility in markets, but here’s why we think they are transitory and unlikely to derail the longer-term recovery.
Post-Crisis Investing for the Long Haul
(17:32) Looking to macroeconomics, we evaluate if investors are now at a market inflection point and what the associated implications are that could lie ahead.
Remember Value Investing?
After being ignored for 13 years, value sectors such as financials, materials, energy and industrials are back—and we believe economic acceleration and rising rates set the stage for a multiyear recovery.
Why We Believe Value Still Has Value
Here are three reasons why many investors have neglected value stocks for so long—and why we think each one of them is wrong.
Making the Case for Value
(13:36) With the value rally that has now been emerging, what might investors want to consider when it comes to value?
Could It Finally Be Time for Value?
Why we think the recent reversal in growth stocks’ multiyear dominance could be set to continue.
Fixed Income: Short Duration, Floating Rates and Flexible Strategies
Fixed income portfolios are arguably most at risk from an inflationary environment. Inflation and higher rates tend to lower the present real value of a fixed income stream. The longer-dated those income streams are, the more sensitive their present value is to changes in rates—they exhibit longer duration. Should a long-term real yield of 1% or even zero be required to make inflation settle between, for example, 2.5% and 3.0%, nominal yields will be substantially higher than they are today.
Inflation is Hot—and Could Stay Hot
Autumn and winter should bring respite from the northern hemisphere’s punishing summer heatwave, but we don’t think they will ease the inflation temperature.
Into the Inflationary Slowdown
As inflation persists and recession risks rise, our Asset Allocation Committee sees more yield potential in fixed income and favors commodities for ongoing inflation exposure, but remains cautious in equities.
The ECB’s Trilemma
Are we seeing the start of another eurozone crisis, or can the ECB fashion an effective tool to manage volatile southern European bond spreads?
The Two-Way Market Persists
The search for value is on, particularly in short to medium duration.
A Value Opportunity in Hybrids
Recent spread-widening appears to reflect concern about rising rates incentivizing extensions, and an economic slowdown incentivizing coupon deferrals—concerns we regard as significantly overstated and a source of attractive valuations.
EMD as a Hedge Against Inflation
Inflation concerns have caused investors to search for income with lower duration, and we believe Asia high yield delivers on this front.
Regime Change
While we do not anticipate a recession over the next 12 months, the prospect of slowing growth and stubborn inflation has led us to downgrade our view on equities, and prepare for a new regime in which real assets could generally perform better than financial assets such as stocks and bonds.
Understanding Short Duration for the Long Run
(21:01) The current High Yield market seems to display the characteristics that could make it an interesting investment opportunity, but does it answer an investor’s question of, will I get paid back?
Investing Through Inflation and Growth Uncertainty
Recession seems unlikely this year—opening up opportunities in credit.
REITs as a Hedge Against Inflation
Real estate investment trusts across a number of sectors could show strength in 2022, driven by inflation and secular trends.
Fixed Income Amid Inflation
What does the current inflationary environment mean for multi-sector fixed income portfolios?
Senior Floating Rate Loans: A Low-Cost Hedge Against Inflation
Where to find yield without duration when inflation is elevated.
Solving for a Year of Inflections
The Solving for 2022 delegates voted on what they think will be this year’s best-performing investment category—and here’s why we think they are right.
Hike Rates and Carry On
A positive economic outlook makes the case for holding risky assets through 2022, in our view, but higher rates are likely to mean higher volatility: we therefore favor a focus on income or “carry” from risky assets, alongside strategies with the potential to withstand price volatility.
Persistent Inflation, Policy-Driven Volatility
The evolution of inflation and central bank policy will likely drive higher market volatility in 2022.
New Year, New Monetary Policy
As markets adjust for an environment of tighter monetary conditions, we preview the key themes of our forthcoming Fixed Income Investment Outlook.
The Most Important Rate in the Whole Wide World
Markets may be missing the importance of record-low real rates, and the potential impact if they start to rise.
The Fight Against Inflation Has Begun
We think that inflation, central bank policy and real rates will define the battlefield for markets in 2022—but will the most volatile skirmishes come sooner or later in the year?
Real Rates Are the Key to This Cycle
Most of the consensus trades for 2021 failed in the second half of the year, and we think understanding why could be critical to unlocking the rest of this unique cycle.
Inflation Could Unbalance Policy and Portfolios
As inflation pressures build and investors question central bank policies, we think it’s increasingly important to diversify against market volatility and rising prices.
Central Banks Emerge From Hibernation
Rates volatility reflects a change in the inflation narrative, and could accelerate central bank policy adjustments.
Clearing the Hurdles
On a 12-month horizon, this looks to us like an attractive environment for risky assets, but the inflection point in the current cycle is proving particularly volatile: adopting a more defensive view in the short term could help investors clear the immediate hurdles.
Caution Today, Opportunity Tomorrow
We think a more cautious stance represents a prudent approach to an already volatile inflection point between early-cycle recovery and mid-cycle expansion.
The Inflation Generation
Temporary price spikes over the past 20 or 30 years have all passed without sparking a general rise in inflation, but here are four reasons why we think this time is different.
The Great Housing Diaspora of COVID-19
(19:35) As a result of mass deurbanization during the pandemic, the residential housing markets have seen unprecedented buyer activity over the last several months. But as buyer demand continues to saturate the market, where does that leave supply?
Technical Storm Drives Treasury Yields Lower
Light summer trading and overstretched short-duration positioning have led to a slump in rates—but is there anything more fundamental in the move?
From Hanging Ten to Choppy Waves
Does a change in the weather forecast at the Federal Reserve signal an end to the early stage of this recovery cycle?
Course Correction or Policy Framework Change?
Faced with higher inflation numbers, the Federal Reserve has begun to create more meaningful parameters around its evolving stance on monetary policy.
Two-Way Markets Are Back
After nearly a year going up in a straight line, questions about inflation, the economic cycle and central bank messaging have brought more push and pull back into markets.
The Great Reset: Rethinking Globalization
In the first of our conversations about the post-pandemic landscape, Erik Knutzen spoke with economist Nancy Lazar about the future of globalization.
Bond Yields Under a More Hawkish Fed
A more hawkish Fed may not lift Treasury or investment grade credit yields, and that raises important questions for fixed income investors and asset allocators.
Roaring Twenties, or Back to the Late Teens?
This is a truly singular global recession and recovery, and it makes portfolio diversification both vital and challenging.
Public vs. Private Credit: Competitors or Allies?
(19:50) Over the course of more than a decade, private debt has been in high investor demand. But how does private debt come into play alongside public fixed income markets?
REITs, Inflation and Rates
History suggests that a strong case can be made for a dedicated REITs allocation if you think inflation and interest rates are going up.
REITS and Rates
History suggests that real estate securities can be an attractive investment if you expect inflation and rates to go higher.
Alternative Investments: Real Assets and Uncorrelated Strategies
Historically low bond yields, tight credit spreads and high equity market valuations raise the likelihood that stocks and bonds will become more correlated and more volatile. In our view, the potential for structurally higher inflation and a less favorable growth-inflation mix increases that likelihood still further. The traditional 60/40 portfolio appears vulnerable. We think alternative diversifiers will need to play a more prominent role, with a focus on those with particular sensitivity to inflation.
Ukraine and the Path to Deglobalization
This year’s recommendation for vacation reading offers a reminder of Ukraine’s millennia-old importance for global trade, helping us understand why today’s conflict could be yet another lasting blow against globalization.
Into the Inflationary Slowdown
As inflation persists and recession risks rise, our Asset Allocation Committee sees more yield potential in fixed income and favors commodities for ongoing inflation exposure, but remains cautious in equities.
Reasons for Optimism
Caution may be warranted during the uncertainty of the next quarter—but after markets have sold off so much, does it really make sense to be more pessimistic now than at the start of this year?
After the Revaluation, the Slowdown
Our Asset Allocation Committee believes that, whether we enter a recession or not, the expected slowdown and ongoing market volatility could feel like one for investors.
Inflation-Fighting Properties
Real estate has tended to get a prominent page in inflation playbooks—but do some parts of the market get a particularly strong tailwind from rising prices?
Regime Change
While we do not anticipate a recession over the next 12 months, the prospect of slowing growth and stubborn inflation has led us to downgrade our view on equities, and prepare for a new regime in which real assets could generally perform better than financial assets such as stocks and bonds.
REITs as a Hedge Against Inflation
Real estate investment trusts across a number of sectors could show strength in 2022, driven by inflation and secular trends.
Back to Basics: Commodities and Radical Uncertainty
Why we think raw materials can help hedge against the known knowns, the known unknowns, the unknown knowns, and the unknown unknowns.
Commodities: An Inflation Hedge for All Seasons?
(24:55) The inflation we’re seeing today is unlike what we have seen in 40 years. Thus commodities have become top of mind as a traditional inflation hedge. But what other factors come into play in asset allocation?
Commodities and Diversification in 2022: The Best Defense is a Good Offense
Commodities have acted as a call option on “inflationary busts”.
Solving for a Year of Inflections
The Solving for 2022 delegates voted on what they think will be this year’s best-performing investment category—and here’s why we think they are right.
Hike Rates and Carry On
A positive economic outlook makes the case for holding risky assets through 2022, in our view, but higher rates are likely to mean higher volatility: we therefore favor a focus on income or “carry” from risky assets, alongside strategies with the potential to withstand price volatility.
The Fight Against Inflation Has Begun
We think that inflation, central bank policy and real rates will define the battlefield for markets in 2022—but will the most volatile skirmishes come sooner or later in the year?
The Future State of Real Estate Investing
(17:33) Real estate, both in the public and private markets, can act as a diversifier during times of uncertainty. But what are the other factors to consider within this asset class?
Real Rates Are the Key to This Cycle
Most of the consensus trades for 2021 failed in the second half of the year, and we think understanding why could be critical to unlocking the rest of this unique cycle.
Taking a Second Look at Real Estate Secondaries
(13:48) With inflation and interest rate risks on the rise, what might make investors want to take a second look at real estate secondaries?
Inflation Could Unbalance Policy and Portfolios
As inflation pressures build and investors question central bank policies, we think it’s increasingly important to diversify against market volatility and rising prices.
Clearing the Hurdles
On a 12-month horizon, this looks to us like an attractive environment for risky assets, but the inflection point in the current cycle is proving particularly volatile: adopting a more defensive view in the short term could help investors clear the immediate hurdles.
Caution Today, Opportunity Tomorrow
We think a more cautious stance represents a prudent approach to an already volatile inflection point between early-cycle recovery and mid-cycle expansion.
All for One, One for All
Available data suggests that a balanced risk allocation to real assets may be the most robust way to mitigate the impact of upticks in inflation.
From Hanging Ten to Choppy Waves
Does a change in the weather forecast at the Federal Reserve signal an end to the early stage of this recovery cycle?
Commodities: Equities or Futures?
As more investors turn their focus back to commodities, it is worth remembering that commodity equities have historically generated surprisingly poor commodity exposure relative to more direct investments.
Two-Way Markets Are Back
After nearly a year going up in a straight line, questions about inflation, the economic cycle and central bank messaging have brought more push and pull back into markets.
The Great Reset: Rethinking Globalization
In the first of our conversations about the post-pandemic landscape, Erik Knutzen spoke with economist Nancy Lazar about the future of globalization.
Making the REIT Move In Real Estate
(22:00) As we’ve begun to adjust to the “new normal” of a post-pandemic economy, what might investors want to keep their eyes on in REITs?
When Do Commodities Become a Hot Commodity?
(16:36) Since the early beginnings of civilization, commodities, such as grains, metals and coffee among others, have been a vital part of global commerce. But how will commodities today be impacted as we move further into the new normal?
Roaring Twenties, or Back to the Late Teens?
This is a truly singular global recession and recovery, and it makes portfolio diversification both vital and challenging.
Public vs. Private Credit: Competitors or Allies?
(19:50) Over the course of more than a decade, private debt has been in high investor demand. But how does private debt come into play alongside public fixed income markets?
REITs, Inflation and Rates
History suggests that a strong case can be made for a dedicated REITs allocation if you think inflation and interest rates are going up.
Post-Crisis Investing for the Long Haul
(17:32) Looking to macroeconomics, we evaluate if investors are now at a market inflection point and what the associated implications are that could lie ahead.
REITS and Rates
History suggests that real estate securities can be an attractive investment if you expect inflation and rates to go higher.