Services Tags: Defined Contribution

Brighter Lights at the End of a Shorter Tunnel

Biotech company Moderna’s announcement earlier this week that its coronavirus vaccine successfully helped healthy adults produce antibodies against COVID-19 sent the S&P 500 up 3% and the 10-year Treasury yield rebounding from 0.64% to 0.73% on Monday. In this pandemic, the last week of March marked a pivotal turning point when investors started seeing some light at the end of the tunnel. That week was when new infections and hospitalizations started peaking and declining in Italy and Japan, soon to be joined by New York and Washington state. That week also coincided with the Federal Reserve’s and U.S. Treasury’s — later followed by Congress’s — announcement of their substantial stimulus. Credit spreads have gradually been tightening ever since as stimulus ramped up, a number of vaccines and treatments reached Phase I and Phase II clinical trial milestones, and more recently, various states have started to reopen. Moderna’s favorable results added fuel to this positive sentiment and the market’s upswing.

In this newsletter, we examine the evolution of credit spreads and yields in 2020 to gauge the attractiveness of holding investment grade and sub-investment grade credit. Vaccine development is central to assessing the markets today as it is the ultimate permanent solution, and we detail the prospects of various vaccine candidates as well as discuss how investors should allocate to credit in light of vaccine progress in conjunction with key market metrics. Although the vaccine is a permanent solution, fiscal and monetary stimulus have proven to be critical for mitigating damage to the economy and markets in the interim and are still integral to assessing the markets today. We take a closer look at these lifelines from the U.S. government in an attempt to answer the all-important question: how much runway is there with this stimulus? The hope is that current programs coupled with any future policies will be sufficient to sustain and ultimately revive the economy until a vaccine allows for complete resumption of economic activity. Lastly, we dive into the fallen angels (bonds downgraded from investment grade to sub-investment grade), defaults, and bankruptcies that are threatening the credit markets right now and how to address these as investors. Throughout this discussion, we highlight three perspectives that are critical to measuring the attractiveness of an investment or an asset class: valuations, technical factors, and fundamentals.

Read > Brighter Lights at the End of a Shorter 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.

Is It Game Over for Value Stocks?

Over the last ten years, growth stocks have outperformed value stocks by an average 5.3% per year, and the differential is even greater for shorter time periods. As this differential widened in recent years, the expectation was that value stocks would provide greater protection in a market downturn as the market should theoretically place a greater emphasis on quality and stability, attributes typically found in value stocks. However, as the market rapidly fell into bear market territory in February and has whipsawed back and forth since doing so, growth stocks have continued to outperform value stocks, a trend which has been surprising to investors. At this point, those who have maintained a value bias in their portfolios are undoubtedly frustrated as the paradigm has failed to play out through this market correction and has likely left market participants debating the merits of value stocks altogether.

To help answer these questions, we have enlisted two of our senior research analysts, Samantha Grant (“SG”) and Jessica Noviskis (“JN”), to discuss the value vs. growth dynamics we have seen over the last decade, and to assess the future performance outlooks for each over the next market cycle. In the following conversation, Jessica covers the topics from a growth perspective while Samantha tackles the questions from the value side. Collectively, their answers should help investors decide if it is finally time to abandon value stocks, or if this is just another long-dated cycle in the equity market.

Read > Is It Game Over for Value Stocks?

 

 

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.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act

In the early hours of March 25th, the Senate and the Trump administration reached a deal on the $2 trillion stimulus package aimed at cushioning the fall for U.S. businesses and consumers in the wake of the coronavirus pandemic. The bill was approved by the Senate late on March 25th, passed through the House on March 27th, and was signed by Trump the afternoon of March 27th. The size of the package is over 9% of the U.S. GDP and is greater than the three major relief packages passed during the 2008 crisis combined.

This legislative update summarizes the key elements of the CARES Act and concludes with an assessment of the expected impact of this stimulus package.

Read > The Coronavirus Aid, Relief, and Economic Security (CARES) 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.

Eric Gaylord Speaking at Investment Management Institute DC Literacy Summit 2/13

On Wednesday, February 13, Eric Gaylord, CFA, will be speaking at Investment Management Institute’s first DC Literacy Summit in Stamford, Connecticut.

Eric will join two other panelists in a discussion entitled, “How Should Employee Education Work?” reviewing the role, process, and practical use of education for defined contribution plan participants.

The DC Literacy Summit brings together institutional investors, consultants, and asset managers to exchange ideas and solutions for program structure and development, particularly with new participants and younger employees. IMI is a leading education and research organization servicing institutional investors and wealthy families internationally.

For more information, please visit the event web page.

 

The Future of Investing: Sustainability and ESG Integration

With 2020 underway, sustainable investing continues to be a trending topic, although the concept of incorporating environmental, social, and governance (ESG) metrics into an investment thesis is not new. ESG integration is returns-focused and incorporates long-term sustainability factors into the investment research process to identify companies with higher return potential.

In this white paper, we examine the current ESG landscape, including the various movements that have preceded ESG integration, recent strides by American corporations, fiduciary guidance, and the growing response by investment managers to meet investor demand, especially in reporting and performance measurement. We also present our approach to incorporating ESG into our manager evaluation process and the best practices our team looks for when performing due diligence for ESG-mandated strategies.

Read > The Future of Investing: Sustainability and ESG Integration

 

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.