Category: Newsletter

Lower for Longer, or Negative Forever?

With Trump’s surprise announcement of additional tariffs at the beginning of this month — a day after the Fed’s rate cut — the yield curve continued its free fall and flattening that began in earnest at the beginning of 4Q18’s dislocation and the gradual heating-up of the tariff war. Sunday’s Argentine Presidential primary election surprise, where pro-free markets incumbent Macri lost to populist duo Fernandez/Kirchner by a wider than expected margin, further exacerbated that trend.

In this newsletter, we examine the driving forces behind this persistent yield curve decline and flattening and potential remedies to the “lower for longer” norm.

Read > Lower for Longer, or Negative Forever?

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.

The Impact of China’s Currency Devaluation

In response to the latest round of tariffs announced last week and set to take effect September 1st, China devalued its currency on Monday. Predictably, this currency devaluation roiled markets with major equity indices plummeting 3% on Monday, with a slight recovery Tuesday as China walked back its devaluation intentions. However, Wednesday’s markets featured further volatility and lower bond yields as investors flocked to safety amidst the longer-term uncertainty created by this week’s news.

This newsletter examines the potential effects of China’s currency devaluation including an analysis of the impact on investments in both the U.S. dollar and the Chinese yuan using the previous two Chinese currency devaluations over the last five years.

Read > The Impact of China’s Currency Devaluation

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.

Stoking the Fire: The First Post-Recession Rate Cut

On July 31, 2019, the Federal Reserve cut interest rates for the first time since the 2008 Financial Crisis from a fed funds target rate of 2.25%–2.5% to 2%–2.25%. This well-telegraphed and long-expected 25 basis point cut, roughly 11 years after their last cut in December of 2008, signals a shift in the Fed’s monetary policy towards one of dovish stimulus after a period of hawkishness from 2015 to 2018 that saw the Fed raise the fed funds target rate nine times from 0–0.25% to 2.25%–2.5%.

This newsletter examines the reasons behind and the initial and potential reactions to the latest interest rate cut, including a look at unemployment, inflation, and the yield curve.

Read > Stoking the Fire: The First Post-Recession Rate Cut

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.

Second Quarter Review of Asset Allocation: Risks and Opportunities

Overall, the second quarter was positive for financial markets, thanks to strong economic fundamentals and expected Fed stimulus. Unemployment remains low at 3.7% and inflation (1.8% year over year) is near the Fed’s long-term target of 2%. However, there are increasing concerns about a global economic slowdown and early forecasts for 2Q GDP growth are around 1.5%, far lower than what we’ve seen in recent quarters. Globally, the most important trends we see are the following:

  • The U.S.-China trade conflict remains ongoing as talks between the two countries resumed, but little progress has been made;
  • The Federal Reserve is expected to cut rates in July and markets are forecasting another one to two cuts by the end of the year;
  • Business sentiment is declining ­— most notably in the PMI manufacturing index, which is now dangerously close to falling below its growth threshold;
  • Britain continues to struggle with its Brexit and elected a new PM (Boris Johnson) on July 23rd;
  • China and Europe are expected in increase their stimulus measures to combat slow growth and overall global uncertainty;
  • Late-cycle dynamics in credit and equity markets.

The impact of these trends is explored further in this newsletter as we review second-quarter performance and expectations going forward for each of the major asset classes.

Read > Second Quarter Review of Asset Allocation: Risks and Opportunities

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.

Boris Johnson Wins Tory Leadership

It’s official. At approximately 12:05 p.m. BST and after a six-week political race, the front-runner, Boris Johnson, won the Conservative Party contest to be the next Tory leader and succeed Theresa May as British prime minister. With the promise of delivering Brexit by October 31st, “come what may,” Johnson trounced his opponent, U.K. Foreign Secretary Jeremy Hunt, garnering more than 66% of the roughly 160,000 votes.

This newsletter outlines the potential effects of Boris Johnson’s election, including Brexit fears, market reaction, and its impact on the U.K. government and economy.

Read > Boris Johnson Wins Tory Leadership

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.

Real Estate: Where Do We Go From Here?

Over the last ten years, core real estate as measured by the NFI-ODCE has delivered an annualized return of almost 9% and has helped boost institutional portfolio returns. However, given the consensus view that we are in the late stage of the economic cycle, coupled with overall global uncertainty and moderating returns in the asset class, investors are wondering if it is time to reduce their allocation to real estate, and if so, where they should allocate these funds.

The following article strives to answer these questions by analyzing the current landscape for real estate investments, including opportunities outside of the traditional “core” strategies that have historically constituted the majority of real estate investments for our clients. Furthermore, we offer guidance on where to allocate assets outside of the real estate asset class if investors have built up overweights to the asset class over the last decade of outperformance.

Read > Real Estate: Where Do We Go From Here?

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.

When Will the SOFRing End?

Global authorities such as the SEC, Federal Reserve, European Commission and European Central Bank are currently transitioning the market’s use of LIBOR as a base rate for floating-rate securities such as bank loans, CLOs and private credit towards the use of the current front runner as a replacement: SOFR, which stands for the Secured Overnight Financing Rate.

This newsletter explains what a base rate is and how it is used in investing, why LIBOR is being transitioned to SOFR and the key differences between the two, and when the change is expected to take effect.

Read > When Will the SOFRing End?

For more coverage on LIBOR, please see our Bank Loans Position Paper and recent Chart of the Week, The Sixth Fed Hike and Rising LIBOR.

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.

Sell in May and Go Away?

Global equity markets declined in May on a flurry of geopolitical news. As tensions persist, stocks are grasping to sustain their former rocket-like pace.

This newsletter details the recent trade and tariff announcements, their impact on the markets, and a look at what to expect in the remaining months of 2019.

Read > Sell in May and Go Away?

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.

Securing Retirement Through the SECURE Act

On May 23rd, with overwhelming bipartisan support, the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) passed in the House with a 417–3 vote. The bill is the first major retirement legislation since 2006 and has 29 total changes or new provisions.

The bill will impact most workers from part-time employees to small business owners to more tenured employees. In this newsletter we have outlined some of the major changes outlined in the SECURE Act.

Download PDF > Securing Retirement Through the SECURE Act

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.

BREXIT: Three Strikes and May Is Out

On Friday, May 24th, Prime Minister Theresa May somberly announced her plans to resign as the Conservative Party leader and head minister of the U.K. Parliament on June 7th. When David Cameron turned over the reins in 2016, post the referendum vote results, May pledged to uphold the decision of the populous and lead the United Kingdom out of the bloc. Yet, May’s best efforts to deliver a withdrawal agreement have come up short, and with growing pressure from her party and another no-confidence vote on the horizon, May bowed out in hopes that a new leader will break the Brexit deadlock.

Angst about the state of Brexit and May’s performance had been coming to a boil throughout the month. On May 3rd, local elections across England yielded an upsetting blow to the country’s two main political parties, the Conservatives and the Labours, which jointly lost 1,380 local seats in backlash from the political dysfunction surrounding the second Brexit extension. May’s push to resolve the impasse prior to EU elections led to numerous resignation calls by both Conservative and Labour party MPs, with members of PM May’s inner circle throwing in the towel.

In light of her resignation, how has the market responded? Who is competing to be Britain’s next PM? Where does this leave the state of Brexit? The purpose of this newsletter is to address these questions and to provide our outlook on how Brexit will shape international investing conversations for the remainder of the year.

Read > BREXIT: Three Strikes and May Is Out

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.