In 2023, capital markets experienced robust growth, with the ACWI Index appreciating by 22.2% and major equity indexes like the S&P 500, MSCI EAFE, and MSCI Emerging Markets registering 8%-11% gains in Q4, propelled by faster-than-expected inflation declines and falling bond yields. The fixed income sector saw significant appreciation, with the Barclays US Aggregate Index up 6.8% in Q4, driven by a 70bps-80bps decline in bond yields. High-yield bonds and leveraged loans also posted strong performances, benefiting from declining base rates, spread compression, and high coupon yields. Hedge funds saw modest gains, led by convertible arbitrage strategies, while private equity and private credit sectors continued to deliver solid returns, despite a slowdown in new deal activity and a cautious outlook on defaults. Private real estate faced pricing pressures, though industrial and some high-quality office properties maintained strong fundamentals. Looking ahead, the outlook is cautiously opt
In Q3, equities dipped 3.4% but are up 11.2% YTD. Rising bond yields impacted US stocks, while international equities felt pressure from Europe and China. Bonds faced challenges, but high-yield assets remained resilient. Hedge funds saw modest growth, while private equity hinted at promising gains. In this environment, we see US Treasuries and certain private investments as offering the most attractive risk-adjusted returns.
Global equity markets (ACWI Index) rose by 6.2% in Q2 and gained 16.7% YTD through July 14, 2023, with US stocks leading the rally due to optimism in tech companies, decreased inflation, positive economic data, and the resolution of the regional banking crisis. International equities had a less impressive performance, while fixed-income markets experienced modest declines and hedge funds saw moderate gains in Q2.
Q1 2023 saw strong US employment and economic data, which led to a spike in US Treasury yields. The collapse of Silicon Valley Bank and Signature Bank on March 10th altered investor expectations regarding interest rate trajectory and economic growth. The equity market has rallied since the SVB news as investors cheered prospects for a sooner-than-expected end to rate hikes followed by possible pivots to interest rate cuts.
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