Special Topic: US Bank Exposure to Commercial Real Estate
US regional and community banks' exposure to commercial real estate (CRE) has come under scrutiny, with banks holding roughly 40% of the estimated $4.5 trillion of US CRE debt outstanding. $1.3 trillion of outstanding CRE debt is set to mature by year-end 2024, and there are concerns that properties
Actionable Investment Opportunities
We highlight actionable investment opportunities across various asset classes, including short-term US and Canadian government debt, high-yield bonds, private credit strategies, preferred and structured equity, venture debt, and new allocations to private equity. The secondary market for LP position
Alternatives & Private Investments
The HFRX Hedge Fund Index was flat in Q1 2023, with convertible arbitrage and credit strategies performing best while global macro/trend following strategies performed worst. Private real estate showed mixed results, and there are concerns regarding refinancing risk as substantial commercial real es
Fixed Income Markets
We discuss the performance and valuation of safe fixed income investments. Yields have pulled back since March due to concerns about US regional banks, and while signs of stress are emerging in credit performance, default rates remain low.
Equity Markets
Equity markets have appreciated YTD across all major regions, with growth stocks outperforming value stocks. Valuations are generally fairly valued to modestly overvalued relative to historical averages, but confidence in forward earnings is lower than normal due to high interest rates, inflation, a
Shorter-term View
The trajectory of equity markets will be determined by interest rates, economic growth, outlook for corporate earnings, and potential for large sustained financial system disruptions. There are three potential scenarios for equity returns over the next 6-12 months, ranging from optimistic to pessimi
Macroeconomic Conditions
US economic growth is expected to decelerate, with the risk of a mild recession in H2 2023 or early 2024. A severe credit crunch could occur if lending is significantly constrained at regional and community banks, especially if deposit outflows or loan losses continue to rise.
Inflation and Labor Markets
Inflation data in the US has been mixed in 2023, with headline CPI declining on a YoY basis but core CPI remaining high. While leading indicators suggest decelerating inflation rates, the pace of deceleration and ultimate trajectory remain uncertain, with the Fed predicting higher short-term rates i
Strategic Asset Allocation View (7-years)
The seven-year forecast predicts mid-to-high single digit equity returns, mid-single digit returns for US government debt and investment grade bonds, and higher returns for new private market strategies. The forecast also anticipates riskier credit assets to be volatile in the next 12 months, but at
Capital Markets Executive Summary
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
