With short-term interest rates seemingly stuck at unprecedented low levels, a key challenge for investors today is how best to obtain compelling yields for cash balances as part of an overall portfolio while maintaining safety and principal protection.
In this newsletter, we examine the current ultra-low yield environment and what options investors may consider in their approach to structuring an optimal cash allocation.
On May 14, Aimee O’Connor, CFP®, was quoted in a FundFire article on the growth of Registered Investment Advisor (RIA) service offerings in the investment consulting industry.
In the article, Consultants’ Latest Target? RIAs in Need of Investment Help, Aimee commented on the area as being a competitive market and added that, “The more consultants try to swim in the private client, high-net-worth area, the easier it is to leverage what they already have internally. It’s a natural extension.” Marquette began servicing RIA clients in 2017; for more information, please reach out to Aimee or by using our contact page.
To read the article, visit the Fund Fire website (subscription required).
The 2020 presidential election is fast approaching on November 3rd and key election issues pertaining to the economy will be viewed with respect to a backdrop of crisis and uncertainty more than ever. Curbing the spread of COVID-19 is at odds with reopening the economy while racial injustice remains a focal point. A potential Biden presidency and Democrat-controlled Senate could result in tax increases aimed at stimulating the economy through public projects and providing a social safety net. In contrast, a second term with Trump would likely mean more of the status quo in terms of keeping the 2017 tax cuts, further trade negotiations with China, and his attempt to nullify Obama’s Affordable Care Act.
In this newsletter, we assess the platforms of both Biden and Trump with a focus on Biden’s proposed tax policies and a perspective on how they are expected to affect the economy and markets. We next examine the historical effect of politics on the markets such as equity performance based on which party controls the White House, Senate, and House of Representatives. Lastly, we take a look at 2020 election expectations based on recent polls and markets.
Read > How Will the 2020 Election Affect the Markets?
This past Saturday, August 8th, President Trump issued several executive actions that serve as an emergency COVID-19 aid package. The package includes three memoranda that provide assistance for the jobless, a payroll tax deferral, and an extension of the student loan payment moratorium and an executive order that provides rental and mortgage assistance to mitigate evictions and foreclosures. The executive actions came about because of a stalled Congress as negotiations over the last two weeks fell apart last Friday, August 7th, between the Senate Republicans with their $1 trillion proposal and the House Democrats with their $3.5 trillion proposal.
This newsletter puts these executive actions into context with earlier federal stimulus packages, including an overview of how each action will be implemented and expected economic and financial impacts.
Read > Trump Bypasses Congress with Coronavirus Relief Executive Actions
The second quarter of 2020 proved to be as eventful as the first, with slow economic results being largely ignored as markets rallied. GDP growth for the quarter is expected to come in at -35.5% YoY, though 3Q GDP projections indicate a significant rebound is expected as the country begins to reopen to “the new normal.” In addition, the unemployment rate came in at 11.1%, down from the April peak above 14%. Below are some highlights from the quarter:
COVID-19 has proven to be a potentially long-lasting concern as it remains to be seen whether we are in for a V-shaped or U-shaped recovery. Economic data is improving slowly, though markets have seemed to shrug off some of the negative news as the S&P 500 moved into positive territory over the one-year period. Though it may have fallen into the background due to COVID-19, 2020 is a presidential election year. Uncertainty surrounding the election will undoubtedly have an impact on forward-looking expectations. In this newsletter, we analyze what all of this means for each asset class.
Read > Second Quarter Review of Asset Allocation: Risks and Opportunities
Friday, October 4, 2019
8:00 AM – 2:00 PM
Marquette clients – Please join us at our annual Investment Symposium to discuss the current market environment, emerging investment themes, and investment stewardship challenges in the year ahead. In addition to our keynote, the event will feature a panel of portfolio managers and six flash talks by our research team that will brief attendees on popular topics and encourage timely conversations with our investment consultants.
Agenda
8:00 – Registration Open/Breakfast
8:45 – Welcome and Opening Remarks by Brian Wrubel
9:00 – A Prism of Capital Market Views: Portfolio Manager Panel featuring:
John W. Rogers, Jr., Chairman, Co-CEO & Chief Investment Officer at Ariel Investments
Olga Bitel, Partner and Global Strategist at William Blair
Matthew J. Eagan, CFA, Executive Vice President and Portfolio Manager at Loomis, Sayles & Company
10:00 – Break
10:15 – Flash Talks: Session 1
The Investment Case Behind ESG Investing and Implementation in Practice
Nat Kellogg, CFA, Director of Manager Search
Beyond Traditional Real Estate: Exploring Opportunities in Non-Core Real Estate
Jeremy Zirin, CAIA, Senior Research Analyst, Real Assets
So Many Risks, So Little Time: What’s Next in Global Risk?
Nicole Johnson-Barnes, Research Analyst
11:00 – Break
11:15 – Flash Talks: Session 2
U.S. Against the World: Should Investors Still Own International Stocks?
David Hernandez, CFA, Senior Research Analyst, Non-U.S. Equities
Samantha T. Grant, CFA, CAIA, Senior Research Analyst, U.S. Equities
Machine Learning for Investing: How is Artificial Intelligence Being Used in Asset Management?
Ben Mohr, CFA, Director of Fixed Income
Pick Your Portfolio Poison: Recession or Inflation?
Greg Leonberger, FSA, EA, MAAA, Director of Research
12:00 – Keynote Presentation by Mohamed El-Erian, Chief Economic Advisor at Allianz, Chair of President Obama’s Global Development Council, author of two New York Times bestsellers, and former CEO and co-CIO of PIMCO
2:00 – Adjourn
The Standard Club
320 S. Plymouth Court
Chicago, Illinois 60604
Tel: (312) 427-9100
Business casual attire required.
On the surface it looks disjointed. We are in the midst of what is likely the worst recession since the Great Depression, but the stock market has rallied back in a matter of weeks and currently sits just 10% off all-time highs. Treasury yields appear to be pricing in an extended period of softness, and high yield spreads have only started to show signs of recovery. While the future is always an unknown, it feels as if we are facing a new level of uncertainty with many more moving parts.
In this newsletter, we explore equity market dynamics to help reconcile the apparent gap between the recent good news from equity markets and overwhelmingly negative news from the economy and bond markets.
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
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?
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?
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