Quarterly Commentaries

Near-term U.S. economic risks have receded somewhat while market risks remain, in our view. For 2025, we believe continued late-cycle economic growth should provide select market opportunities, though managing risk from valuation and market concentration will be crucial.

The first half of 2024 saw a continuation of various trends, including slower economic growth, easing inflation, tight monetary policy, and unusually narrow equity market leadership. More recently, several regime changes, including the start of Fed rate cuts, a reduction of political uncertainty, and the broadening of market leadership may offer potential opportunities for active investors in a mature but ongoing economic cycle.

As the Fed starts an easing cycle, tight monetary conditions and their impacts could linger and signs of slowing growth abound.  Still, late-cycle conditions have supported attractive market returns for two years, and we continue to see a mix of opportunities and risks as market leadership broadens.

While uncertainty can drive volatility, our research shows Presidential election-year returns are more a function of economic drivers than politics.  This year, both candidates have administration records that may help reduce broad market uncertainty, and we are focused on potential sector impacts of various election scenarios.

We see opportunities as late-cycle growth persists in 2024, but slowing growth and elevated sentiment also warrant caution.

Slow-to-moderate growth seems likely in the U.S. through 2024, but late-cycle risks persist and international conditions remain tenuous.  We see numerous return and risk management opportunities in this backdrop.

Late-cycle conditions persist, and we see paths for either slowing growth or a “soft landing” in 2024. We expect sectors with stable earnings growth to drive positive-but-volatile equity markets, while the interest rate backdrop should benefit fixed income.

Risks abounded in 2023, yet some areas of the U.S. and global economy showed significant resilience.  As a much-predicted recession failed to appear, inflation cooled, and the Fed eventually paused, U.S. equities posted a strong-but-narrowly-led rally, while elevated yields provided positive returns for fixed income year-to-date, despite interest rate volatility.

A mix of resilience in some economic measures and deterioration in others is typical in the later stages of a cycle. As ongoing slow growth faces headwinds, we believe balancing defensive exposures and moderate economic sensitivity is warranted.

Late-cycle conditions continue with the economy facing lagged impacts of Fed tightening, tougher lending standards, and declining profits. We continue to avoid or underweight the most economically cyclical parts of the markets.