Capital Markets Executive Summary
Global equity markets gained 8.1% during the quarter, led by a 10.4% rise in US large-cap stocks. Despite strong initial performances, markets retreated by 5.1% in early April amid rising US inflation and geopolitical tensions. In fixed income, the Barclays US Aggregate Index saw a 0.8% decline in
Strategic Asset Allocation View (7-years)
Over a seven-year forecast, the focus shifts towards intermediate-duration Treasury notes and new private investment strategies due to evolving market conditions. With U.S. equities and government debt expected to generate mid-single-digit returns, we adjust our allocation strategy to capitalize on
Macroeconomic Conditions
The US economy demonstrated robust growth, with a 3.4% annualized increase in Q4 2023 and continued strength into Q1 2024. We also explore economic performance in Europe and China, noting Europe’s recovery from near-recession and China’s Q1 GDP growth of 5.3%, which exceeded expectations.
Government Policy and Wealth Taxes
Recent proposals by President Biden aim to implement a minimum 25% tax rate on ultra-high-net-worth households. The narrative extends globally with various states and countries moving towards higher capital gains taxes to fund social initiatives, reflecting a worldwide trend towards more aggressive
Shorter-term View
Combining key issues with potential future scenarios, we forecast market movements influenced by inflation trajectories and economic growth patterns. Detailed scenarios range from optimistic projections of robust GDP growth and moderate inflation to pessimistic forecasts involving reaccelerated inf
Equity Markets
The S&P 500 surged by 10.4% in Q1, though it faced a 5.4% decline in early April due to inflation concerns and interest rate hikes. We scrutinize equity valuations with the S&P 500’s market-cap weighted P/E ratio at 19.8x, indicating slight overvaluation compared to historical norms.
Fixed Income Markets
The quarter was challenging for fixed-income assets, with significant declines in US Treasuries and corporate bonds. The analysis discusses the yield environment and bond market responses to economic indicators, noting current yields present attractive opportunities in safer fixed-income investment
Actionable Investment Opportunities
For certain clients we recommend increasing allocations to mid-term US government debt and engaging more in secondary private equity transactions. In private investments, we highlight the potential of senior direct lending and asset-backed credit solutions, particularly for middle-market borrowers,
Alternatives & Private Investments
Private equity reported a 6.2% rise YTD, reflecting solid performance despite broader market challenges. The discussion covers hedge funds, real estate, and private credit markets, highlighting evolving investment valuations and strategic entry points in the current economic climate.
