Topic Tags: International Economy

Unleashing the Power of AI

The launch of ChatGPT — a chatbot technology that can mimic human-like understanding and generate well-crafted, conversational responses — marks a pivotal moment for artificial intelligence (AI). Similar to the mainframe era of the 1950s, the rise of PCs in the 1980s and 1990s, and more recently the mobile and cloud era, AI could become the next technology platform that drives significant productivity gains and transforms our world.

The advancement of AI systems has resulted in increased adoption of the technology by various organizations, including businesses and governments. While the integration of AI within the economy brings excitement, it also raises questions about its impact on productivity, the potential displacement of human workers, and whether it will be used ethically. While limited adoption prevents us from being able to fully measure the effects AI could have on the workplace, the chart above summarizes the cost savings and revenue benefits noted by firms that have implemented AI within their organizations. On the cost side, the functions most widely benefiting from AI adoption were supply chain management (52%), service operations (45%), strategy and corporate finance (43%), and risk (43%). On the revenue side, respondents broadly saw increases in marketing and sales (70%), product and/or service development (70%), and strategy and corporate finance (65%). While there are fair criticisms of AI, the potential benefits are clear. As we continue to navigate the rapidly evolving landscape of AI, we must work to ensure that this powerful technology is harnessed in a way that benefits both individuals and society as a whole. By doing so, we can unlock the full potential of AI as the next transformative technology platform.

1Q 2023 Market Insights Video

This video is a recording of a live webinar held April 20 by Marquette’s research team, featuring in-depth analysis of the first quarter of 2023 and themes we’ll be monitoring 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.

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Central Bankers Unite

Over the weekend it was announced that UBS will buy beleaguered Credit Suisse for $3.2 billion after a drastic plunge in Credit Suisse’s share price. The terms of the deal will see Credit Suisse shareholders receive 1 UBS share for every 22.48 Credit Suisse shares held. The Swiss National Bank has pledged a loan of up to 100 billion Swiss francs ($108 billion) to support the takeover and shore up any liquidity and the Swiss government announced that it would provide more than 9 billion francs to backstop some of the losses that UBS may incur as a result of the merger. Until the completion of the deal, expected by the end of 2023, Credit Suisse and UBS will operate as separate businesses and are conducting business as usual.

The shotgun deal, which follows turmoil in the U.S. banking system over the last few weeks, was brokered by Swiss authorities to prevent serious damage to the Swiss and international financial markets. Banking concerns have pushed global central bank authorities to coordinate a response to maintain sufficient liquidity in the global financial system. The U.S. Federal Reserve, Bank of Canada, Bank of England, European Central Bank, and Swiss National Bank have agreed to use standing U.S. dollar swap line arrangements to enhance liquidity. Separately, on March 22, the U.S. central bank will announce its next policy decision. Markets will be closely watching not only the action taken but Chairman Powell’s comments on the strength of the U.S. economy and global financial system given the recent banking turmoil.

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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 Take the Reins

Following a year of heightened volatility, stubborn inflation, and intense monetary tightening, global economic growth is expected to slow in 2023 and remain below trend in 2024. Based on the IMF’s forecast, global growth during that period is expected to be driven by emerging markets and developing economies.

The two countries projected to see the strongest economic growth are China and India, with China forecasted to grow 5.2% in 2023 and 4.5% in 2024, and India 6.1% and 6.8%, respectively. China is one of the world’s largest economies and is rebounding following three years of strict COVID policies. However, a number of risks plague investors, including regulatory and governance issues as well as geopolitical concerns. Additionally, China, a leader in lower-cost labor and manufacturing, is facing an aging population and declining workforce, with the country experiencing a net population decline in 2022 for the first time in decades. India, with a population that is expected to surpass China’s this year, is projected to become the world’s third-largest economy and stock market in the coming decade. Optimism surrounding the Indian economy can be attributed to its ongoing structural reforms, tariff negotiations with the West, young and growing population, and robust domestic demand. These factors have helped India weather the storm of recent economic uncertainty better than other emerging markets. As the world is projected to enter a period of slower economic growth, investors will benefit from remaining well-diversified as inevitable bright spots emerge with the ever-changing composition of the global economy.

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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.

Ahead of the Game

Heightened inflation and pressure on central banks to raise rates were common themes around the world in 2022. As rate hiking cycles weighed on equity markets, emerging markets that were quicker to respond to elevated inflation with higher rates earlier on began to stand out as a relative bright spot. Inflation is receding in these countries and a lack of headwind from continued rate increases could position emerging markets for strength relative to developed markets. The relative differences in central bank policy are reflected in earnings estimates for the two asset classes. Emerging markets estimates were the first to be revised lower and are now up off November 2022 lows. Developed markets, on the other hand, with the delayed impact of higher rates and a fairly resilient consumer, are only starting to see downward revisions now. This week’s chart compares earnings revisions for emerging markets and developed markets. Figures above zero indicate the revisions ratio — upward revisions less downward revisions as a percentage of earnings estimates — is higher for emerging markets and figures below zero mean that the revisions ratio is higher for developed markets. With emerging markets earnings revisions potentially on an upward track, along with multiples at historically attractive levels, the asset class may be set up for relative strength from here.

Print PDF > Ahead of the Game

 

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 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.

Things Are Looking Up: Good News for China

China has been a hot topic over the last year amid market-moving headlines and heightened stock market volatility. U.S.-China geopolitical tensions, zero-COVID policies, real estate market turmoil, and regulatory constraints have all weighed heavily on Chinese equities. Recently, however, things have been looking up. Chinese equities ended last week on a high note, continuing the significant rebound in performance since the end of October. The CSI 300, which tracks the top 300 stocks on the Shanghai and Shenzhen exchanges, is close to bull market territory, up 19% since October 31. Chinese equities as a whole have staged an even more impressive rebound, up close to 55% during the same time frame.

Two major shifts in Chinese policy have contributed to this performance, with the first being the overhaul of strict zero-COVID policies. Beginning in December, Chinese authorities rolled back stringent guidelines by reducing testing and quarantine time for travelers, lessening isolation restrictions for COVID “close contacts”, and scrapping penalties for airlines that carried COVID cases into the country. The second shift is help for China’s struggling real estate sector. According to Bloomberg, close to 150 billion yuan ($24B USD) will be provided in relief in the first quarter to top developers. Additionally, mortgage rates and minimum down payments have been lowered, with the hope of increasing demand for real estate. Along with these shifts in policy, the dollar decline has only helped make Chinese equities more attractive.

Looking forward, despite the recent good news and market rally, Chinese markets are likely to remain volatile, with uncertainties and risks remaining. The reopening of the Chinese economy could add to global inflation pressures, COVID outbreaks have been on the rise in China, and the country has seen its greatest population decline since the 1960s. These dynamics present both risks and opportunities in the market this year and beyond, and developments will be key to emerging markets performance from here.

Print PDF > Things Are Looking Up: Good News for China

 

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.