Over the last two decades, US corporate profit margins have surged and have contributed more than half of the excess return of equities relative to cash. Without that consistent expansion of margins, US equities would be 40% lower than they
Macro Weekly Talks on trade between the US and EU and Japan look to be on the cards The spectre of a trade war has haunted a global economy this year already struggling with the lagged effects of the tightening
Viewpoint April 2019 U.S. corporate bond markets have transformed in the past few years as the proportion of BBB rated credit has swollen. There’s little room for error, as we noted back in January 2018. Where do we stand now?
The S&P 500® was up 1.79% in March, bringing its YTD return to 13.07%. The Dow Jones Industrial Average® gained 0.05% for the month and rose 11.15% YTD. The S&P MidCap 400® fell 0.74% for the month and was up
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Introduction Pension actuaries select or recommend investment return assumptions for a variety of purposes, including accounting and financial reporting, public and multiemployer funding valuations, and projections of future funding and solvency levels or asset liability modeling. When selecting or recommending
Investors worldwide hang on every news story detailing the ups and downs of the increasingly tense relationship between the United States and China. While helpful, these updates typically note the ebb and flow of the tide, with little regard for
Japan has had so little inflation in its core consumer price indices that it has just experienced a sobering anniversary: 20 years of zero interest rates. Whether Japan’s experience provides a roadmap for the rest of the developed world is
Private commercial real estate continues to produce steady returns, in line with long-term expectations, even though there are some differences across major property types, exhibit 1. Long-horizon real estate investors expected returns to slow in line with historical performance. After
2018 was a rollercoaster ride for financial markets: after trade tensions weighed on investors’ sentiment in Q1, strong corporate earnings and a rosy U.S. economic outlook initially drove a recovery, before uncertainty over global economic growth and future Fed policy
Uncommon truths The global auto cycle appears to have peaked and not just in China. This was in fact preceded by weakness in global auto share prices and could do more than trade tensions to explain the end-2018 economic deceleration.
Macro perspectives The deceleration in economic growth – and the entry of the US into the late stage of its expansion – casts a shadow on corporate profit margins. This year we could see a US-led earnings recession – typically
The S&P 500 Equal Weight outperformed the S&P 500 by 0.5% in February, and in a reversal from prior months, is now outperforming by 0.6% over the past twelve months. 6 out of 11 equal weight sectors outperformed their cap
In February, the S&P 500 continued where January left off, posting a broad 2.97% gain, after January’s 7.87% gain (the best since January 1987, the year of the crash), mostly negating December’s 9.18% fall (the worst December since 1931). The
Executive summary Low volatility equity strategies aim to provide market-like returns with significantly lower risk. They look to accomplish this by offering downside protection and meaningful upside participation. Given their defensive nature, investors want to know whether low volatility strategies
Central banks have calmed markets down Central banks are continuing to dictate market momentum and never more spectacularly so than in January. The fourth quarter market crash occurred after the Fed had confirmed that its balance sheet shrinkage and rate-hike
On the Markets Business managers are always looking for ways to maximize the value of the firm. One way to do that is to encourage everyone to think like an owner. After all, if employees are thinking like an owner
Weekly Commentary We see room for ongoing U.S. dollar strength versus most developed market peers and further depreciation against EM currencies. Global stocks rose on hopes of progress in U.S.-China trade talks. Lower oil output in January pushed oil prices
We expect the Base Case to be the most likely outcome. In a quick summary of the Base Case assumptions, positive Gross Domestic Product (GDP) growth, a strong labor market and moderate inflation persist. Interest rates move up gradually, leaving
Monthly Investment Strategy Our probabilistic model sees rising risks but not an actual US recession over the coming 12 months. We reduce our US GDP growth forecast to 2.2% for 2019, further below the 2.5% consensus but still above potential
Uncommon truths US investment grade yields have risen of late, while treasury yields have fallen. Other things being equal, this makes us more attracted to the asset class but the high level of debt is a worry.
Summary US corporate debt excluding Financials has risen to levels of GDP previously associated with US recessions, while a number of key leverage ratios paint a similarly negative picture. We assess the risks and their implications. – A 300% rise
Progress in trade talks, soft landing ongoing The recent statements following the bilateral meetings between the US and China suggest that important progress has been made, and more details are emerging compared to the quiet early January round. However the
U.S. Economic & Interest rate outlook We entered the year wondering if the economic tides had turned. Risk appetite fell and volatility spiked amid a strong negative market reaction to the Federal Reserve’s rate increase in December. But markets caught
Market Snapshot The S&P 500® was up 7.87% in January, bringing its one-year return to -4.24%. The Dow Jones Industrial Average® gained 7.17% for the month and was down 4.40% for the oneyear period. The S&P MidCap 400® was up
