Category: Newsletter

Did Volatility Risk Premium Strategies Deliver in March?

The longest bull market in history ended abruptly in March as U.S. stocks finished their worst quarter since the Global Financial Crisis (GFC). The magnitude and speed by which the S&P 500 index sold off from late February through March shocked investors; what happened over multiple years during the GFC happened in a matter of weeks. During that same time period, the CBOE Volatility Index (VIX) hit an all-time high, as markets tried to discern the extent of the economic fallout from the spread of COVID-19. Volatility Risk Premium (VRP) strategies — which are designed to provide equity upside but downside protection — were not immune to the financial market dislocations but performed in line with our expectations and are set to rebound more quickly when broader market indices stabilize.

This newsletter reviews VRP strategies and provides an overview of recent manager performance and expectations going forward.

Read > Did Volatility Risk Premium Strategies Deliver in March?

 

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Light at the End of the Tunnel?

While the coronavirus pandemic is far from over, signs of improvement ranging from infections peaking to progress in the search for a cure seem to be arising on a daily basis lately. The following newsletter summarizes some of these key positive indicators and offers some guidance for portfolios in the months to come.

Read > Light at the End of the Tunnel?

 

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

How Will Private Real Estate Be Impacted by Coronavirus and the Market Downturn?

As we have seen in past market downturns, almost all risk assets feel some degree of pain as correlations trend towards one and returns drift downwards in seemingly perfect harmony. In the case of private real estate, headlines have been sparse to this point but it is only a matter of time until the repercussions are felt, particularly for the sectors hardest hit by the outbreak.

This newsletter details potential near-term and long-term effects of the coronavirus pandemic on private real estate, with a look at historical performance as well as some of the unique features of this particular downturn.

Read > How Will Private Real Estate Be Impacted by Coronavirus and the Market Downturn?

 

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

 

Defined Contribution Guidance: Coronavirus Update

March certainly came in like a lion (though whether it came out like a lamb is debatable). The continued spread of the coronavirus pandemic led to sharp and steep sell-offs in both the bond and equity markets as investors fled to cash. An array of fiscal and monetary stimulus aimed at staving off a global recession followed suit.

With so many looming unknowns, what can plan sponsors do to best support defined contribution plan participants? This newsletter provides an overview of recent developments in response to the coronavirus and how plan sponsors can maintain fiduciary best practices and continue to help participants act prudently in the days that lie ahead.

Read > Defined Contribution Guidance: Coronavirus Update

 

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

 

Signs of a Market Bottom?

In just a matter of weeks, U.S. equities went from all-time highs to bear market correction territory. As of March 20th, the S&P 500 had a drawdown of -31.9% from its February 19th high. Following the steep sell-off, equities subsequently rallied the week of March 23rd, logging weekly gains that were among their best in history. With equities having officially fallen into correction territory then subsequently appearing to show signs of stabilization and fiscal/monetary stimulus poised to (theoretically) cushion the impact of COVID-19, investors are left to wonder if the worst is over.

However, identifying market bottoms is a difficult endeavor. Every bear market is unique and this one is no different. Based on the severity of economic contraction thus far, it is likely that we are headed for — or possibly already in — a recession. Notably, though, not all bear markets coincide with a recession and not all recessions coincide with a bear market. Given that a recession is looming if not already here, we examined the last 40 years of data when bear markets coincided with recessions to see if we can identify signs of a bottom. Over the past 40 years, there were four such periods: 1973–1975, 1981–1982, 2000–2001, and 2007–2009. In the following newsletter, we review four categories of data over these time periods: technical, valuation, economic, and COVID-19 to see if we can identify consistent indicators of a market bottom.

Read > Signs of a Market Bottom?

 

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

 

April 2nd Update: A Quarter That Will Go Down in History

With March officially in the books, the following is a brief summary of what has transpired in the capital markets since our update early last week. As expected, the coronavirus has exploded across the U.S. and continued its spread across Europe as well. At the time of writing, the number of cases is approaching 1 million worldwide and has exceeded 200,000 here in the United States. Stocks finished their worst quarter ever on Tuesday and volatility continues to haunt the markets. While the worst may still not yet be behind us, we hope that the growing number of shelter in place edicts and more consistent social distancing may help to stem the coronavirus outbreak across the world. Please note that all return data in the following discussion utilizes the quarter end date of March 31st, 2020.

Read > April 2nd Update: A Quarter That Will Go Down in History

 

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Following China’s Lead?

Year-to-date, China has suffered the least among global equity markets, down 18%. In comparison, the U.S. and Eurozone have produced losses greater than 30%. Why have Chinese equities outperformed? Does that performance provide us with any insights into future expected returns? In this newsletter, we will examine several data points to provide some possible answers to these questions, including a look at coronavirus case counts, the latest PMI numbers, and monetary and fiscal measures.

Read > Following China’s Lead?

As always, please reach out to your consultant or our research team for more details about any of the information in this newsletter. For more Marquette coverage on COVID-19, please view the Coronavirus Updates topic on our Research page.

 

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

March 23: Coronavirus Update and Portfolio Guidance

The following newsletter presents our most recent guidance on the coronavirus pandemic, stimulus measures enacted across the globe, and asset class summaries. This is an extremely fluid environment with markets changing by the minute; we will continue to update clients as the week progresses. All of the data cited in this update is as of March 20th unless otherwise noted.

Read > March 23: Coronavirus Update and Portfolio Guidance

As always, please reach out to your consultant or our research team for more details about any of the information presented in this update. For more Marquette coverage on COVID-19, please view the Coronavirus Updates topic on our Research page.

 

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

An Analysis of Bear Markets and Recoveries

After reaching a high of 3,386 on February 19th, the longest bull market in history officially made a record fall into bear market territory in the span of just 16 trading days and only a few days after its 11th anniversary. The S&P 500 has now been in a bear market, defined as a decline of 20% or more, for nearly a week. So when should we expect the market to hit bottom? And when will this decline end?

This newsletter uses historical data to provide guidance and explanation of bear markets and their subsequent recoveries, including a detailed look at S&P 500 performance, small-cap performance, volatility, and valuations. While no one knows the specifics of how the future will play out, the data we’ve compiled offers perspective on what the typical bear market correction is, how far we are from that level, worst case scenarios, and possible opportunities to buy equities at attractive prices.

Read > An Analysis of Bear Markets and Recoveries

 

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Back to Square One: Fed Cuts Rates to Zero, Market Responds

In response to the Fed’s emergency rate cut of 100 basis points over the weekend that brought the target fed funds rate to 0.00%–0.25%, the S&P 500 plunged 12% on Monday (March 16th). This is likely a sign that the markets believe that monetary stimulus is not enough to stave off a coronavirus-triggered recession.

The following newsletter includes Marquette’s assessment of the situation as well as perspectives on liquidity, fiscal stimulus, positioning, and expectations for the economy and financial markets in the coming months.

Read > Back to Square One: Fed Cuts Rates to Zero, Market Responds

 

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.