Category: Chart of the Week

A Renewed Focus on Renewables

In addition to the humanitarian toll of the conflict in Iran, the world is currently confronting the impact that trade disruptions in the Strait of Hormuz are having on energy markets. To this point, oil importing nations in Asia are bearing the brunt of these disruptions, with many of these countries instituting measures like school and work closures, transportation restrictions, and manufacturing cutbacks in order to save on fuel costs. These dynamics underscore the strategic importance of energy independence and could ultimately result in meaningful shifts in how various countries power their economies.

While the conflict may lead governments to see the value of diversifying energy sources in a new light, the search for alternatives to fossil fuels is not new. Along with environmental concerns, reliance on finite resources imposes limitations on power generation capacity. Those limits are at odds with groundbreaking technological advancements in artificial intelligence, which are propelled by infrastructure that requires vast amounts of energy to operate. As illustrated in the chart above, more than half of newly installed energy capacity in the last five years has come from renewable sources like solar and wind, and that share is still increasing. Countries like China and Brazil are leaders on this front, with 58% and 87% of their energy capacity additions coming from renewables last year, respectively. Opportunities for investment should continue to emerge as countries around the world commit capital to expanding renewable energy infrastructure, making this a trend worth monitoring for investors going forward.

This Too Shall Reconstitute

Rooted in medieval Persian Sufi thought, the adage “this too shall pass” speaks to the fleeting and impermanent nature of the human condition. For investors, this aphorism can serve as a useful framework for understanding the constantly evolving composition of the upper end of the U.S. equity market. As this week’s chart shows, the top 10 constituents of the S&P 500 Index have changed dramatically over the last 40 years, with each new decade seeing both additions to and subtractions from this basket of companies.

In 1985, the top of the S&P 500 Index was heavily weighted toward industrial conglomerates, energy producers, and legacy financial and telecommunications firms such as IBM, Exxon, AT&T, and General Electric. This composition reflected an economy still anchored in manufacturing, physical infrastructure, and regulated industries with durable but relatively slow-moving competitive dynamics. Capital intensity, domestic scale, and regulatory barriers to entry helped entrench incumbents, allowing a small set of diversified conglomerates and commodity-linked businesses to dominate equity indices. As can be observed in this week’s chart, the top 10 constituents represented roughly 21% of the S&P 500 Index in 1985. In contrast, the top 10 constituents at the end of last year represented more than 40% of the benchmark, with technology-oriented companies like NVIDIA, Apple, Microsoft, Alphabet, Amazon, and Meta topping the benchmark and accounting for an outsized share of index earnings and returns in recent years.

The transition between these two regimes did not occur abruptly but rather through decades of structural changes, including the rise of the digital economy, the decline in manufacturing’s share of GDP, and the increasing importance of intangible assets such as software, data, and intellectual property. Indeed, the 1990s and early 2000s saw the rise and consolidation of the internet economy, which led to the reshaping of information, communication, and commerce. The years following the Global Financial Crisis further accelerated the dominance of scalable, asset-light business models, while low interest rates and abundant liquidity disproportionately benefited high-growth technology firms. At the same time, several former index leaders either stagnated, were disrupted, or lost relative economic relevance, leading to a gradual but persistent turnover at the top of the index.

Against this backdrop, the current composition of the S&P 500 Index should not be viewed as fixed, but rather as a snapshot of a specific moment in time. If history is any indication, the next decade will likely bring another reshuffling of top index constituents as new technologies, industries, and business models emerge. For investors, this suggests that maintaining broadly diversified equity exposure while remaining disciplined around rebalancing is prudent, as market leadership, however dominant it appears at a given time, has historically been transient rather than permanent.

Let’s Hear It for Latin America

Latin American equity markets have shown remarkable strength in 2026. After a strong start to the year, the MSCI Emerging Markets Latin America Index corrected by only 4% in March amid a broad, more pronounced market pullback due in large part to the conflict in Iran. Brazil, which represents the largest economy in Latin America, was uniquely positioned to handle commodity market disruptions given its status as a net exporter of crude oil and a world leader in renewable energy utilization. Indeed, almost 90% of Brazilian electricity is generated via hydropower, wind, and solar sources, so the nation has been able to withstand recent energy shocks better than many other Western nations. The Central Bank of Brazil also cut interest rates for the first time in two years in March, though additional rate cuts that were anticipated at the start of this year are now more uncertain. Investors have also looked on Latin American financial institutions with favor in recent time, as banks across the region (e.g., Creditcorp in Peru, Itaú in Brazil, and Grupo Financiero Banorte in Mexico) are outperforming their global peers on a year-to-date basis due to attractive earnings projections. Additionally, significant foreign investment in the Brazilian economy has led to higher volumes and earnings for B3, the Brazilian stock exchange.

Global markets have stabilized in April, with the S&P 500 Index now trading near calendar year highs and developed international equities also exhibiting renewed strength. At the same time, Latin American equities have continued their upward trajectory, with the MSCI Emerging Markets Latin America Index now up more than 20% since the start of 2026. Following strong performance in 2025 and after having avoided a major drawdown in the wake of the Iran conflict, investors may want to keep a close eye on Latin American stocks as the year progresses.

The Sorrows of Young Workers

Entry-level jobs have traditionally served as the primary bridge between education and stable employment, offering young workers a foothold from which to build skills and careers. That bridge now appears to be in a precarious position, however, as data points show that unemployment among recent college graduates has risen meaningfully in just a few years (even as headline labor market indicators remain relatively stable). Indeed, the unemployment rate for recent college graduates was 5.6% at the end of last year, compared to a more moderate figure of 4.2% for the entire United States.

Several factors could explain this situation. First, the nature of entry-level work is changing, as positions that once required little experience increasingly demand that applicants possess prior skills, internships, or even several years of relevant work. This dynamic leaves many new graduates caught in a paradox: unable to gain experience because they lack it. Hiring trends reinforce this challenge. Employer demand for early-career talent has flattened, and companies appear more reluctant to invest in training, instead favoring candidates who can contribute immediately. The result is a bottleneck at the bottom of the labor market, where supply continues to grow but opportunities do not keep pace. Broader economic forces are compounding these pressures. Technological change, particularly the increasing adoption of automation and artificial intelligence, is reshaping the types of tasks firms are willing to assign to junior workers. In many cases, routine or entry-level responsibilities are being automated or consolidated into higher-skill roles. At the same time, hiring has become more selective and uneven across industries, with growth concentrated in sectors that are less accessible to many recent graduates. Research from regional Federal Reserve banks underscores that these trends are not merely cyclical but may reflect longer-term shifts in how labor markets function. When entry-level hiring weakens, career progression slows, wage growth is delayed, and workforce participation may decline as discouraged workers step back from job searches. Over time, this can erode productivity and limit economic dynamism, as fewer workers gain the early-career experience needed to move into more advanced roles. The implications extend beyond individual job seekers to the broader economy, which depends on a steady pipeline of talent development.

Taken together, these dynamics point to a labor market that is still strong on the surface but potentially fragile beneath it. A robust economy is not defined solely by low unemployment or steady job creation, but also by the accessibility of opportunity across all stages of a worker’s career. Ensuring a sufficient supply of true entry-level roles (i.e., positions that offer training, mobility, and a pathway forward) may therefore be critical not just for today’s graduates, but for sustaining long-term economic growth.

Liberation Day: One Year Later

On April 2, 2025, President Donald Trump announced a sweeping set of tariffs on imports into the United States. Dubbed “Liberation Day,” the announcement marked one of the most significant shifts in U.S. trade policy in decades and initiated a period of heightened uncertainty across global supply chains and financial markets. One year later, it is useful to examine how markets and economic participants have navigated the resulting trade environment.

A key distinction when assessing the impact of tariffs is the difference between the policy tariff rate and the effective tariff rate (ETR). While the headline policy rate often attracts the most attention, the ETR provides a more accurate measure of economic impact. The ETR reflects the ratio of duties actually collected relative to the total value of imports entering the country. Because it incorporates supply-chain adjustments, exemptions, and technical exclusions, the effective rate tends to have a closer relationship with market outcomes than the stated policy rate.

Following Liberation Day, the monthly ETR rose sharply (from roughly 3% in March 2025 to approximately 7% in April 2025) before continuing higher and reaching a peak near 10.9% in October. By the end of February 2026, the rate had moderated but remained elevated at slightly above 8%. Over that period, the U.S. Treasury reported that the government collected approximately $295 billion in net customs duties. The administration highlighted a decline in the U.S. trade deficit of roughly 24% during the same time frame.

Another important concept is the tariff pass-through rate, which measures the extent to which higher tariffs translate into higher prices paid by businesses and consumers. Although tariff costs are shared across the global supply chain, they are not distributed evenly. Research from the Federal Reserve Bank of New York suggests that the majority of the tariff burden has fallen on U.S. importers, with estimates indicating that more than 85% of the incidence was borne domestically. Similar findings have been reported by the European Central Bank, which estimated that the pass-through to U.S. consumer prices reached roughly one-third in 2025 and could rise further if elevated tariff levels persist.

Federal Reserve officials have also acknowledged the inflationary implications of tariffs. During the FOMC press conference last month, Chair Jerome Powell noted that tariffs associated with Liberation Day had contributed to modestly higher inflation and that the full price effects could take additional time to materialize.

The policy landscape has continued to evolve. In February 2026, the U.S. Supreme Court ruled that the broad Liberation Day tariffs exceeded the administration’s authority under emergency powers, forcing the rollback of some measures and raising questions about potential tariff refunds. Nevertheless, the administration has since explored alternative legal pathways to maintain certain tariffs, underscoring that trade policy remains fluid.

As the economic effects of the original tariffs continue to unfold and as new trade measures are considered, global markets remain attentive to the evolving policy environment. One year after Liberation Day, tariffs continue to serve as a reminder that shifts in trade policy can carry meaningful economic consequences for businesses, consumers, and investors alike.

Regulation Abdication?

The Basel capital framework was created to ensure that banks maintain sufficient capital to absorb losses and reduce the risk of systemic financial instability, thereby strengthening the resilience of the global banking system. Basel I established minimum capital requirements for banks based primarily on credit risk to strengthen the stability of the international banking system, while Basel II refined the framework by introducing more risk-sensitive capital requirements and supervisory oversight to better align bank capital with the actual risks banks take. In response to the Global Financial Crisis, during which Basel II ultimately proved insufficient, Basel III significantly increased capital, liquidity, and stress‑testing requirements. While these reforms improved financial stability, they also raised the cost of holding corporate loans on bank balance sheets, contributing to a sustained decline in corporate lending as a share of total bank credit after 2008. This dynamic can be observed in the chart above. As bank balance sheet capacity for corporate lending became more constrained, non-bank lenders increasingly stepped in to provide direct financing to companies, helping to fuel the growth of the private credit asset class. A proposed Basel III “Endgame” overhaul in 2023 would have further increased capital requirements, but this overhaul was ultimately shelved amid industry pushback and concerns that new rules would have been onerous.

Last month, U.S. regulators unveiled a proposed update to bank capital rules, marking a notable recalibration of the post‑crisis regulatory framework. The proposal would ease several elements of the existing framework, including aspects of Basel III implementation, the Global Systemically Important Bank (G‑SIB) surcharge, leverage requirements, and stress‑testing assumptions. Policymakers acknowledged that earlier rounds of post‑crisis regulation, while successful in strengthening the financial system, may have unintentionally constrained banks in terms of their ability to intermediate credit (particularly to businesses) and encouraged lending activity to migrate outside the regulated banking network. New proposals seek to preserve a robust capital framework while helping banks better support corporate lending on their balance sheets and compete more effectively with non-bank lenders.

Easing capital constraints could allow banks to re‑enter certain segments of the corporate lending market, particularly lower‑risk or relationship‑driven spaces, which may help stabilize or modestly increase the share of bank balance sheets allocated to corporate loans. However, private lenders retain structural advantages, including speed of execution, flexibility in deal structuring, and a greater willingness to finance bespoke or higher‑risk situations (areas banks are unlikely to fully re‑enter even with modest capital relief). As a result, competition may increase at the margin for more standardized corporate credit, potentially tightening spreads and slowing incremental share gains for private credit. Overall, the proposed changes may reduce the pace of disintermediation, but they do not undo the long‑term structural shift away from bank‑dominated corporate lending highlighted in this week’s chart.

Pulling the Right Value Creation Levers

In the period between 2009 and 2022, private equity managers thrived amid an environment of low interest rates and rising asset prices, which led to financial engineering serving as a primary driver of portfolio value. In recent years, however, higher interest rates, elevated valuations, and tighter exit conditions have reduced the effectiveness of this value creation method. As a result, financial engineering has shifted from a core value driver to a supporting tool, prompting firms to increasingly focus on operational improvements within portfolio companies. Indeed, top-line growth and margin expansion are the key areas of value creation today, with revenue growth accounting for roughly 54% of value creation for deals that saw exits between 2017 and 2024. This dynamic can be attributed to the role of revenue growth as a sustainable and longer-term source of value creation, as it supports revenue base expansion, enables EBITDA growth, and facilitates more favorable valuation outcomes.

To drive both growth and profitability, private equity firms deploy a range of operational initiatives, including cost transformation, pricing optimization, technology integration, and supply chain improvements. While studies show that operations and pricing are the most effective levers in value creation playbooks, it is important to remember that execution is just as important as planning. To that point, a recent study found that more than half of executives cited poor implementation as a primary and controllable cause of underperformance of their businesses. Ultimately, as operational improvements become more crucial to value creation, private equity firms that can execute with discipline, particularly across revenue growth and margin expansion, will differentiate themselves when it comes to delivering returns and building more resilient and scalable businesses.

Pain at the Pump

Global energy costs have risen sharply this month due to a convergence of geopolitical shocks, as critical infrastructure and transport routes have been severely disrupted in the wake of U.S. strikes on Iran. Specifically, oil prices have climbed above $100 per barrel for the first time since 2022, while European gas futures have nearly doubled from late February levels. These developments have led to pain at the pump for many in the U.S., where the cost of a gallon of regular, unleaded gasoline has risen to more than $3.96 as of this writing. This figure represents a roughly 33% increase from the national average just one month ago.

It is hard to understate the importance of the Persian Gulf region to commodities markets, with the Strait of Hormuz alone typically handling around a quarter of seaborne oil and a significant share of liquefied natural gas (LNG) shipments. The effective closure of this waterway has choked off a vital artery for the global energy trade, and damage to the LNG export capacity of Qatar has further tightened markets. With shipping traffic in the region reduced or halted due to security risks, traders are now pricing in the possibility of prolonged energy shortages. The current situation is particularly acute because ongoing disruptions affect not just production but also the transportation of commodities that have already been produced, amplifying the supply squeeze. Additionally, oil producers in the Gulf have scaled back output as storage capacity reaches its limits, both on land and aboard tankers offshore. According to the International Energy Agency, production has been reduced by at least 10 million barrels per day, which represents more than half of the volume that typically passes through the Strait of Hormuz.

Beyond the immediate supply loss, markets are also responding to the risk of sustained or worsening disruption. Damage to key facilities (e.g., large-scale LNG processing plants) could take years to fully repair, raising the prospect of a prolonged imbalance between supply and demand. Meanwhile, continued military escalation increases the likelihood that additional infrastructure could be targeted. This uncertainty has led to a risk premium being embedded in prices, as buyers compete to secure alternative supplies and hedge against future shortages. In effect, the combination of physical damage, logistical bottlenecks, and geopolitical risk has created significant upward pressure on energy prices, with potential ripple effects across inflation, industrial activity, and global economic growth.

Closing Time

This week’s chart illustrates a clear structural shift in the fundraising dynamics of North American closed-end real estate funds over the past two decades. While funds in the early 2000s were typically able to reach final close within roughly 5–8 months, fundraising cycles have lengthened significantly in recent years. Indeed, the average time from first close to final close extended to approximately 25 months in 2025, reflecting a far more competitive and selective capital raising environment.

Several factors have contributed to this trend. First, institutional investors now maintain more mature private real estate portfolios and increasingly prioritize re-ups with existing managers, limiting capacity for new relationships. As a result, raising capital has become a more resource-intensive and prolonged process for fund sponsors. Additionally, real estate capital flows appear increasingly concentrated within two segments of the market: large, diversified platforms with multiple product offerings and specialized managers with clearly differentiated strategies. This dynamic raises the barrier to entry for emerging managers while reinforcing the advantage of established franchises with strong investor relationships and scalable platforms. In this environment, thorough manager due diligence is increasingly critical for real estate fund investors, who must move beyond brand recognition and carefully evaluate a manager’s sourcing capabilities, portfolio construction discipline, and ability to deploy capital effectively across market cycles. As fundraising timelines extend and capital becomes more concentrated among select platforms, investors who conduct rigorous underwriting will be better positioned to allocate to managers capable of consistently executing in a more competitive and capital-constrained real estate landscape.

Buy High, Sell Low?

Warren Buffett once implored investors to “be greedy when others are fearful,” and this sage advice is certainly applicable to the high yield bond market. Bond investors (who have not been living under a rock) are likely aware that high yield spread valuations are extremely tight at present. Specifically, the OAS for the Bloomberg U.S. High Yield Corporate Index reached 250 basis points on January 22 of this year, which represents its lowest level in nearly two decades. Further, outside of brief periods of widening, high yield spreads have remained well below long-term averages for multiple years. These dynamics exist for several reasons (e.g., solid corporate balance sheets, a resilient U.S. economy, and the overall higher quality of the market) and there is no denying that there is currently minimal value to be found in high yield spreads. All this begs the question: When will spreads eventually widen and by how much?

Put simply, it is impossible to answer these questions without the ability to predict the future (if you can predict the future and happen to be reading this, please call me). Indeed, timing spreads is usually a fool’s errand, but this does not stop investors from trying. When conditions are tight, many postpone capital deployment until spreads are wider and have better value, which is actually a reasonable strategy if it can be executed properly. However, a major flaw exists in this approach: Human behavior. Significant widening of high yield spreads often coincides with major economic shocks and lower asset values across portfolios. Fearful and not wanting to “catch a falling knife,” most investors will again postpone allocation decisions until economic risks subside. Since spreads widen and peak quickly, these fears can, ironically, cause investors to miss the better value they were waiting for in the first place.

This week’s chart highlights seven of the most significant spread widening periods in the history of the Bloomberg U.S. High Yield Corporate Index, as well as the cumulative 2-year performance for the index immediately following those peaks in spreads. These periods all coincided with significant economic shocks that led to elevated fear among investors, which likely delayed investment decisions but also presented strong buying opportunities. Specifically, the average cumulative return for the index in the two years immediately following these shocks was more than 43%. It is important to note that this outsized performance would have been difficult to achieve, as, barring incredible luck, buying at the peak of spreads is highly unlikely. The more relevant takeaway here is as follows: The longer it takes to allocate, the more value that is missed (on average). To put this idea in numerical terms, an investor who waited six months to invest after the peak spread levels in the instances outlined above saw an average two-year performance reduction of nearly 20% relative to one who bought at peak levels.

To be clear, Marquette is not advocating the timing of spread levels, but the information detailed above does demonstrate that even when risks seem greatest, delaying an investment due to fear of losses can result in missed opportunities. In the case of high yield spreads, it is always helpful to remember that what goes up must come down.