Our Investing 101 video series covers the fundamentals of investing. This series aims to create a knowledge base for trustees, staff, and other investors of the key terms and concepts that they encounter most frequently, with guidance provided by several of Marquette’s research analysts and directors.
The series covers:
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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.
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 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.
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.
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.
Bank loans represent a key strategic asset class for most institutional investors’ fixed income portfolios. Some of the critical benefits of bank loans include yield that is typically greater than that of core bonds, a floating rate and therefore very little interest rate risk, and a senior secured level in the debt capital structure of issuers such that default risk is minimized and recovery rates are maximized. This position paper covers the history of the asset class as well as some unique characteristics that make it a vital part of many institutional investors’ portfolios. We will also examine its historical returns and correlations with other asset classes, as well as its risks ranging from credit to liquidity risk and interest risk to reinvestment risk. We will conclude with an assessment of its recent valuations as well as how to access this asset class.
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.
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.
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.
Municipal bonds remain attractive and still make sense for high net worth investors on a go-forward basis even in the wake of the Tax Cuts and Jobs Act that went into effect in 2018 and the spread-widening that we experienced in the credit markets during the fourth quarter of 2018. This research brief compares the current state of municipal bonds versus taxable bonds, including:
Read > Municipal or Taxable Bonds for High Net Worth 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.
In 2017 the global economy underwent a synchronized move upward and investors saw equities throughout the world generate double-digit returns. That momentum was lost in 2018 and most economic data points missed analysts’ expectations leading to downward revisions in GDP growth. As a result, several major central banks have taken steps to become more accommodative to help navigate the slowdown.
In the U.S., the Fed has put future rate hikes on pause and has communicated it will be patient on future adjustments. Based on Fed Funds futures, the market expects an eventual rate cut. In Europe, the ECB extended its no rate hike stance through the end of 2019. Additionally, the central bank announced its third targeted long-term refinancing operation aimed at avoiding a credit squeeze that could exacerbate the economic slowdown. In China, authorities organized a stimulus package including $298B in tax cuts to help boost domestic demand. Additionally, the country has reduced the bank reserve ratio from 17% at the start of 2018 to 13.5% as of 1Q19. Though still early, there has not been a marked improvement in global economic activity. However, markets have welcomed the more accommodative stances from these three key central banks and equity markets have rebounded from the tough 4Q 2018.
Print PDF > Global Central Banks React to Slowed Economic Momentum
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.
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