This week we shared our outlook for the economy and markets in the second quarter of 2023. For much, much more detail, please download the slide deck for our complete analysis of the second quarter macro and market environment.
Market Insights
Mark Twain, Jack Ryan, and The U.S. Dollar’s Dominant Reserve Currency Status
Investors have been handwringing about the end of the U.S. dollar’s status as the world’s dominant reserve currency for decades, yet the dollar has maintained its spot at the top of the reserve currency stack through these doubts and challenges.
2024 Outlook: Stranger in a Strange Landing
Ample analytical energy has been expended in the great debate about what kind of “Landing” the U.S. economy will experience in 2024. Will it be a “Soft Landing” where growth remains relatively resilient as inflation falls? Or a “Hard Landing” where growth...
Diving Deep into International Equities
For a considerable time, international stocks have been kicked to the side by the market’s infatuation with U.S. large-cap technology companies. International markets represent 194 countries, are responsible for over 84% of global GDP, comprise over 95% of the world’s population, and account for roughly 40% of the world equity market capitalization.
Private Credit & Asset Allocations
When considering the range of possibilities in private credit—primarily those in the private sector via investment funds as opposed to traditional banking channels — it’s beneficial to understand why companies are choosing to remain private and why access to traditional bank capital has become more challenging.
Second Half 2023 Outlook: The Imagination for Reality
We started 2023 with a mantra from Goethe: “Enjoy what you can, endure what you must.” After a roaring rally in equities and a much-improved showing from fixed income compared to 2022’s weakness, 2023 has been a year of far more enjoyment than enduring.
“Both Sides Now”
We will continue to monitor financial markets very closely so that we can better determine the sustainability of the recent more broad-based rally. We could be quick to change our opinion depending on new developments. We expect many surprises are possible at any time. This is not the time for complacency. We find ourselves always returning to our view that the hallmark of the period since the onset of the pandemic is one of “rapidity of change.”
“Anticipation”
persistent and “sticky.” We trust that evidence of slowing wage growth and a “cooling” U.S. labor market has begun to emerge. In last week’s commentary, we highlighted the reasons why we thought that the Fed most likely would “skip” hiking the federal funds at its June 13-14 meeting. Financial markets mostly have priced in now this probability, and the consensus now is that a July hike is most likely. Nevertheless, a lack of conviction has fostered many divergent opinions. The minutes of the Fed’s last meeting continue to show that the Fed’s staff continues to “anticipate” a mild U.S. recession. Many analysts and investors seem to agree. Others – including Fed chair Powell – think a recession can still be averted.
“No One Knows”
We are inclined to give the benefit of the doubt as to the sustainability of the broadening out of the U.S. stock rally as shown on Friday. We will continue to monitor financial markets very closely for more “clues.” The “true” bottom line is that “No One Knows.”
“I Ain’t Worried”
We view NVDA’s narrative this week as a “game changer” in respect to a risk-reward analysis in evaluating growth stocks. This is especially true for AI related stocks. This could make many investors less willing to sell such stocks and more willing to buy such securities. This could also limit the downside to such stocks. Given the large capitalization of many of these securities, this could also limit the downside of many “cap weighted” stock averages.