Services Tags: Investment Consulting

Is the Sky Falling? An Early Analysis of the 2023 Debt Ceiling Crisis

The U.S. debt ceiling was initially established in 1917 as a limit on how much the federal government was allowed to borrow. At the time, the ceiling was enacted to simplify the borrowing process, but more recently, it has become a political tool that can threaten the stability of our economy and financial markets. Modifying the debt ceiling began as a routine act of Congress — there have been more than 100 changes to the debt limit since the end of World War II, with “clean” increases enacted under both Democratic and Republican leadership. Since 1980, however, increases to the debt ceiling have been increasingly intertwined with partisan spending and deficit reduction initiatives, with the eleventh-hour agreement in 2011 the most extreme example to date of how far parties are willing to go.

This newsletter places the 2023 debt ceiling crisis into historical context, analyzing what outcomes are likely from here and potential impacts on the government, markets, businesses, and consumers.

Read > Is the Sky Falling? An Early Analysis of the 2023 Debt Ceiling Crisis

 

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.

2023 Market Preview: Trail Guide to 2023 Asset Class Performance

As winter takes hold in the northern hemisphere, there are those that choose to escape to warmer climates and those that embrace the season and choose the mountains. Anyone familiar with downhill skiing knows that every ski trail is marked with a shape and color to designate its difficulty. For those unfamiliar with these ratings, the North American system looks like this:


Of course, weather and trail conditions can also impact a trail’s difficulty and must be accounted for when turning down the mountain: environment and terrain matter. Similarly, investment prognostications must recognize the current setting. By now, the environment is all too well known: high inflation, aggressive Fed policy, Russia–Ukraine war, labor supply shortages, and a potential recession. These topics have been covered extensively in recent letters and continue to loom over markets as we start 2023. At a high level, general consensus is that the majority of rate hikes from the Fed are behind us (two are expected for 2023 at time of writing), and inflation will continue to normalize in 2023, thus further supporting the thesis of fewer rates hikes from the Fed over the next year. If a recession comes to fruition, expectations are for it to be short-lived and shallow which reduces the long-term threat to markets.

With this backdrop in mind, we turn our attention to an asset class by asset class outlook for the coming year, assessing the degree of difficulty for each to deliver positive returns in 2023. In some cases, the difficulty will change as the year goes on — similar to trails that are “Most Difficult” for the first half and become more palatable as the journey goes on…which brings to mind a certain trail in Utah that the author found himself on last year that literally had him over his skis…but I digress. Tighten your boots and click into those skis!

Read > Trail Guide to 2023 Asset Class Performance

Download > 2023 Market Preview Report with 100+ additional charts and data, organized by asset class

Watch >  2023 Market Preview Video recording of our research team’s live webinar analyzing last year’s performance as well as trends, themes, opportunities, and risks to watch for in 2023

 

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. Marquette is an independent investment adviser registered under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about Marquette including our investment strategies, fees, and objectives can be found in our ADV Part 2, which is available upon request.

2023 Market Preview Video

This video is a recording of a live webinar held January 19 by Marquette’s research team, featuring in-depth analysis of the final months of 2022 and a look ahead at risks and opportunities to monitor in the year ahead. Our Market Insights series examines the primary asset classes we cover for clients including the U.S. economy, fixed income, U.S. and non-U.S. equities, hedge funds, real estate, infrastructure, private equity, and private credit, with presentations by our research analysts and directors.

Download > 2023 Market Preview Report with 100+ additional charts and data, organized by asset class

Read > 2023 Market Preview: Trail Guide to 2023 Asset Class Performance

 

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For more information, questions, or feedback, please send us an email.

Nat Kellogg Speaking at ALTSCHI 2023 Forum 7/17

On Monday, July 17, Nat Kellogg, CFA will be speaking at ALTSCHI,  jointly hosted by the CFA Society Chicago, CAIA Association, and Markets Group July 16–18.

Nat will be moderating a panel entitled, “Increased Appetite for Secondaries Markets,” described as follows: Private equity investors are increasingly turning to the secondary market to find value opportunities while LPs work to boost liquidity. Exposures are being weighed and sold at heavy discounts in sectors such as hospitality, consumer-related, energy, and transportation. These low asset prices also present valuable opportunities for LPs to co-invest alongside managers at more favorable stages of the investment cycle. How can investors take advantage of secondaries to boost returns and what advantages do they provide over individual manager selection?

ALTSCHI brings together leadership from the region’s institutional investor, wealth management, and alternative asset manager community to share views on alternatives as we continue to navigate these volatile times. For more information, please visit the event webpage.

The Four Virtues of Private Equity

In classical philosophy we are taught that there are four virtues of mind and character. Given the uncertainty that lies ahead in 2023, it is prudent (pun intended) to revert back to these virtues — as they relate to private equity — to outline a framework that may help investors effectively navigate the market.

  • Prudence: The ability to discern the appropriate course of action
  • Temperance: The practice of discretion, restraint, and moderation
  • Fortitude: strength, endurance, and the ability to confront fear
  • Justice: fairness

Read > The Four Virtues of Private Equity

 

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 Real Game of Thrones: Evolving Geopolitical Dynamics and the Potential Impact for Global Investors

Following the Saudi-led OPEC+ announcement that the bloc will cut oil production by 2 million barrels per day, reports emerged that Saudi Arabia will soon join the BRICS alliance and deepen economic cooperation with China. Despite recent tensions with the U.S., the Kingdom’s preeminent role in the Belt and Road Initiative and potential admission to the BRICS alliance could drive global infrastructure development, technology research, and capital market expansion across global markets, potentially benefiting investors with long-term global and emerging market exposure.

This newsletter summarizes the Belt and Road Initiative (BRI) and BRICS Alliance, provides a brief history of Saudi-U.S. relations, and analyzes the Kingdom’s Vision 2030 efforts to diversify Saudi Arabia’s economy, ultimately concluding with the outlook and risks for investors.

Read > The Real Game of Thrones: Evolving Geopolitical Dynamics and the Potential Impact for Global Investors

 

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 Investor’s Holiday Wish List

Hopefully not another year of coal
In the spirit of holiday fun — and an effort to put 2022 investment returns behind us — we have put together our investor wish list for 2023. We have broken the wish list into two categories: the “must-haves,” which carry the most weight and are most observable, and the “stocking stuffers,” which may not be headline grabbers but are nonetheless impactful across economies and markets. Predictably, the “must-have” items focus on a reversal of the major trends that drove the markets this year; we “must have” a better outlook across at least some of these topics. The “stocking stuffers” category is a variety of topics that either directly impact the major trends from 2022 or are more targeted with their impact on specific asset classes. And while we recognize this is not an exhaustive list, we feel strongly that if these wishes come true we can all feel better about market returns in 2023.

This year’s must-haves:

  • Lower inflation
  • Less aggressive Fed policy leads to fewer interest rate hikes in 2023
  • Avoid a deep recession
  • Resolution of geopolitical conflicts

And stocking stuffers:

  • Broad-based earnings in the U.S. stock market
  • A weaker U.S. dollar
  • Credit defaults start to flatline
  • Slowdowns in hiring and wage growth
  • Favorable news out of China
  • History repeats itself

Read > An Investor’s Holiday Wish List

 

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.

International Equities: Waitin’ on a Sunny Day

In recent years, international stocks have underperformed their domestic counterparts by a significant margin. Specifically, the MSCI ACWI ex-US index has compounded annual returns at just 3.3% over the last decade through the end of October, compared to an annualized return of 12.8% for the S&P 500 index. This current stretch marks the longest period of relative outperformance on a trailing 5-year basis for either index since the early 2000s.

This newsletter examines a host of factors that have contributed to this pattern of performance, including differences in composition between U.S. and international equity indices, currency movements, and geopolitics and analyzes the diversification benefits of international equity allocations within portfolios despite performance challenges.

Read > International Equities: Waitin’ on a Sunny Day

 

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.

Emerging Markets: Why Your Active Manager May Be Underperforming

2022 has been a challenging year for investors as both bonds and equities have produced substantial losses. This unusual environment is the product of a kaleidoscope of macro headwinds that have unfolded throughout the year. Against this backdrop, active emerging markets equity managers have generally failed to protect to the downside, with the average manager underperforming the index year to date through September.

There are several potential reasons why active managers have struggled in 2022. The Russian invasion of Ukraine in February caught most market participants off guard and resulted in substantial losses. China’s underperformance relative to the broader index has also served as a headwind for many investors. China is the largest exposure in the MSCI EM Index at 31% and has been challenging for managers to navigate this year given the country’s Zero-COVID Policy, property sector struggles, and negative investor sentiment amid geopolitical tensions. And lastly, the factor environment has dramatically shifted this year, with both Growth and Quality underperforming the broad benchmark. This newsletter further explores the impact that the underperformance of Quality has had on active manager returns this year.

Read > Emerging Markets: Why Your Active Manager May Be Underperforming

 

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.

Q3 2022 Market Insights Video

This video is a recording of a live webinar held October 27th by Marquette’s research team, featuring in-depth analysis of the third quarter of 2022 and risks and opportunities to monitor in the coming months.

Our Market Insights series examines the primary asset classes we cover for clients including the U.S. economy, fixed income, U.S. and non-U.S. equities, hedge funds, real estate, infrastructure, private equity, and private credit, with presentations by our research analysts and directors.

Sign up for research alerts to be invited to future webinars and notified when we publish new videos.
For more information, questions, or feedback, please send us an email.