Market Outlook

Our long-term return expectations for capital markets serve as key inputs into our strategic asset allocation process for multi-asset portfolios and provide context for shorter-term forecasting.

Don’t get caught up in the month-to-month inflation watch—bonds are well positioned across a range of different economics.

In Q3 2023, US CLO debt tranches delivered strong returns across the stack driven by increasing carry and uptick in prices.

The Fed’s punch bowl of easy monetary policy is long gone—don’t expect it to come back anytime soon.

Current rates can seem high (and unsustainable), but history shows the market is reverting back to average.

Capital markets have responded positively to better-than-expected economic outcomes so far this year. While the United States has managed to avoid an official recession, growth is almost certain to slow and increases in profits will be challenged. Given this backdrop, we see equities trading sideways to slightly higher in the near term and we continue to favor the U.S. over the rest of the world.

As we approach the halfway point of the year, all eyes remain on Federal Reserve policy and the severity of an economic slowdown.

An unexpected shock in the banking sector has stress-tested the economy and policymakers. Both initially passed. But the impact on lending and credit conditions remains unclear and increases the likelihood of a mistake by the Fed going forward.

Moving away from an abnormal regime of crisis-era stimulus won’t be a smooth process. But the volatility should be easier to stomach knowing that the destination is likely to be a healthier, more balanced economy.

In 4Q22, US CLO tranches exhibited strong returns across the stack as the loan market delivered positive returns in every month during the quarter.