Category: Newsletter

A Broad Overview of 529 Plans and the Achieving a Better Life Experience (ABLE) Act

September 2016

While 529 plans have existed for over two decades, recent developments such as the Achieving a Better Life Experience (“ABLE”) Act have provided a new avenue for families with eligible disabled dependents to build a pool of assets that cover qualified disability expenses such as education, housing, and transportation. Like 529 plans, 529 ABLE (“529A”) plans provide a tax advantaged investment vehicle for eligible participants.

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New GICS Real Estate Sector

September 2016

S&P Dow Jones Indices and MSCI Inc. have announced the creation of a new real estate sector within the Global Industry Classification (GICS) system. Effective market close August 31, 2016, real estate officially became its own GICS sector, whereas it was formerly included within the financial sector. MSCI implemented this new classification change as of this date, but S&P Dow Jones indices will not see this change made until their quarterly index rebalance date of September 16th. Russell indices will not be affected since they utilize a separate classification system from GICS.

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BREXIT: The Results and What’s Next

June 2016

On June 23rd, the United Kingdom (UK) shocked markets with its vote to leave the European Union (EU). The Remain vote lost to the Leave vote, 48.1% to 51.9%, with a strong turnout throughout the UK. Younger voters sided with the Remain camp by a wide margin, while older voters supported the Leave camp (Exhibit 2). In the weeks leading up to the referendum, global equity/credit markets and the British pound experienced positive price movement in anticipation of a Remain verdict. Using polling information and odds makers as indicators, investors were caught off guard at the Brexit result, leading to dramatic losses for risk assets on June 24th.

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Is the High Yield Market Expecting a Rise in Defaults?

May 2016

Given the depressed oil prices earlier in the year coupled with the recent credit rally, we have gotten many questions from clients about the future direction of default rates, particularly for high yield bonds. In early February, the question was about how high default rates would rise as a result of low oil prices and their subsequent impact on high yield issuers, particularly those in the energy sector. Now, as credit has rallied, investors are wondering if expected default rates are too pessimistic in light of the rally and rise in oil prices. This newsletter contemplates the current implied default rate for high yield bonds and how successfully it has predicted actual default rates, all in an effort to further examine the state of the high yield market. Ultimately, the goal is to provide our clients with guidance on how current conditions in the market could impact their portfolios over both short and long term investment horizons.

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Is Now the Time to Buy Emerging Market Equities?

March 2016

Over the last five years, emerging market (“EM”) equities have struggled to keep up with their developed market (“DM”) counterparts. Losses were extended into 2015, when this asset class lost 14.9%. Given the poor performance, it is not surprising that emerging market equities currently offer the most attractive valuations. The S&P 500 and MSCI EAFE trade at roughly 7–10% above their ten-year averages while the MSCI EM index trades 17% below. Given these valuations, when should investors expect a pick-up in performance?

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Secure Choice: The Next Chapter in the U.S. Defined Contribution Story

February 2016

In this latest Marquette Defined Contribution paper, we build on the similar themes of governance and evolving best practices by emphasizing that positive challenges lie ahead for trusted stewards of defined contribution plan assets; particularly, as defined contribution assets continue to grow, new types of DC plans emerge, best practices evolve, and an increasingly diverse population is gaining access to defined contribution plans. Consequently, those of us that are entrusted as fiduciaries have an opportunity to place segments of our country’s workforce on a steadier path towards retirement readiness.

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2016 Market Preview

January 2016

Similar to previous years, we offer our annual market preview newsletter. Each year presents new challenges to our clients, and 2016 is off to a volatile start with equity markets down significantly, oil dropping below $30, the Fed poised to further increase interest rates, and fears of a China slowdown rippling through the markets. However, other headlines will emerge as the year goes on, and it is critical to understand how asset classes will react to each new development and what such reactions will mean to investors. The following articles contain insightful analysis and key themes to monitor over the coming year, themes which will underlie the actual performance of the asset classes covered.

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Rate Hike Underway

December 2015 Investment Perspectives

At its December 16th FOMC (Federal Open Market Committee) meeting, the Federal Reserve announced a 25 basis point hike to the Federal Funds Rate, which sets broad market short-term interest rates. This move effectively ends the long-standing Zero Interest Rate Policy (“ZIRP”) that has been in place since 2008. In addition to signaling that future rate hikes will remain gradual and data-dependent, the Fed provided guidance of a targeted additional 100 basis point raise throughout 2016.

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