Displaying items by tag: macro

Emerging markets have faced a challenging year, but they remain essential for achieving greater portfolio diversification. According to insights from the Natixis 2025 Institutional Outlook Survey, many institutional investors anticipate robust growth in these markets next year, with monetary policy shifts expected to play a significant role in driving expansion. 

However, China’s economic struggles, including a weak real estate market and reduced consumer spending, have tempered enthusiasm, leading investors to focus on other opportunities. India is gaining traction as a standout emerging market, with many predicting it will surpass China as a top investment destination, while regions like Asia ex-China and Latin America are also drawing attention. 

Though uncertainties persist, adopting a long-term approach to investing in emerging markets can yield strong growth potential as global economic conditions evolve. This strategy allows investors to tap into the transformative opportunities these markets continue to offer.

Finsum: With high risk and growth opportunities, its important to caution clients on the risks and that term is baked into the picture. 

The U.S. economy remains robust, with Bank of America economists projecting annualized growth of 2.4% in 2025, surpassing consensus estimates. Despite uncertainties tied to President-elect Donald Trump’s proposed policies, including tariffs, tax cuts, and immigration restrictions, the U.S. is seen as better equipped than other nations to handle potential economic shocks. 

Trump's tariff agenda, while inflationary and potentially disruptive, would likely have greater global repercussions than domestic ones, reflecting the U.S. economy's resilience. Key indicators, such as high consumer confidence, strong retail sales, and moderated inflation, highlight the country's economic strength. 

Bank of America maintains optimism, predicting that any tariffs implemented will be less severe than campaign promises and that a full-blown trade war can be avoided. 

Finsum: We are not seeing the same resilliance around the globe and this could draw additional investments. 

The federal reserve is holding steady with interest rates, at least at the current time, but other central banks around the globe are cutting and other hiking, creating opportunities in fixed income. While this is certainly adding a level of depth to portfolio management that hasn’t been present often in the last decade, high yields indicate great returns in fixed income.

According to Goldman Sachs investors should consider upping their exposure to high quality fixed income, emphasizing active management due to unpredictable US monetary policy. Despite expectations of rate cuts, recent inflation data suggests a "higher for longer" environment, meaning higher rates may persist. 

As a result, US equities may still be attractive, but some investors are shifting towards fixed income to capitalize on strong yields, particularly in high-quality investment-grade bonds and structured products.

Finsum: Active investors continue to have an edge with disparate monetary policy actions around the globe. 

According to panelists at the SALT conference, private credit will continue to experience strong growth over the next few years. Additionally, they believe that reports of banks stepping in to more aggressively compete with private credit lenders are overblown. Instead, there’s more likely to be partnerships between private credit investors and banks in terms of originating deals and arranging terms.

Michael Arougheti, the co-founder and CEO of Ares Management, sees private credit compounding at an annual rate of 15% for the next decade. He sees growth driven by cyclical and secular factors such as companies staying private for longer, the current high-rate environment, and many ‘good’ borrowers with weak balance sheets. Another factor is the billions being raised for private credit funds across Wall Street. 

Panelists also agreed that there are many selective opportunities in fixed income and credit at the moment. And more opportunities should emerge over the next year, especially with rates staying higher for longer. Arougheti believes that there will be more opportunities created by the lack of liquidity. This underscores another difference between the current environment and past cycles for distressed debt - weakness is not sector-specific, rather, it’s more rate-induced. 

Finsum: At the SALT conference, panelists agreed that despite headlines, private credit markets will see strong growth over the next few years. They also see more attractive opportunities emerging given high rates and limited liquidity. 

In the past few years, the bond market has experienced increased turbulence as the U.S. Federal Reserve embarked on an unprecedented tightening cycle, successfully driving down inflation from 9.1% in June 2022 to 3.4% by the close of 2023. Despite the Fed's efforts to maintain stability since July 2023, fixed-income markets remain volatile, particularly in the 10-year U.S. Treasury yield. Throughout 2023, bond yields underwent significant fluctuations, reflecting market instability despite ending the year close to where it began.

Looking forward, uncertainties persist regarding economic growth and interest-rate policies, emphasizing the need for active management within fixed income. Prioritizing high-quality investments remains crucial amid mixed economic indicators and narrowing high-yield spreads, suggesting a prudent approach to portfolio diversification. 

Furthermore, strategies involving duration positioning and sector rotation offer opportunities for active managers to capitalize on shifting market dynamics, highlighting the importance of adaptability and responsiveness in navigating bond markets.

Finsum: Fund managers can lean into historical analysis and precedent in volatility and factor selection could lead to more robust returns for active management.