July’s financial markets witnessed a significant shift, driven by cooler inflation data that sparked a rotation from mega-cap stocks to small caps, real estate, and bonds. While the S&P 500 gained 1.2%, tech giants and the Nasdaq experienced a downturn, contrasting with small caps’ strongest performance since December 2023. The bond market rallied as yields declined, with longer-duration bonds outperforming, while commodities faced headwinds except for gold, which benefited from lower interest rates and a weaker dollar.

Pathstone’s Learning and Development team hosted the 4^th Annual Associate Class Learning Path in Seattle last week.  Having our newest team members from across the country gather in person creates a special opportunity for immersive learning and to build relationships within the firm. Our 32 associate attendees participated in sessions featuring more than 20 “learning ambassadors,” panelists, and speakers, including senior Pathstone leadership. In addition to taking a deep dive into Pathstone’s history, culture, and services, associates engaged in role-specific training sessions and team-building activities.

We believe investing in our people early in their careers plays an essential role in shaping Pathstone’s future leaders and delivering on our promise to be a multigenerational firm for multigenerational families.

Key Takeaways

• We are adjusting our core fixed income positioning to focus more on the intermediate part of the maturity range. The evolving shape of the yield curve, particularly in tax-exempt bonds, suggests that across multiple possible scenarios, exposure to intermediate duration is most attractive.
• Falling interest rates, low valuations, and improving momentum in Emerging Market equities lead us to restore our allocation to this asset class to strategic target weight after being underweight for some time.
• Private equity valuations have lagged public markets significantly in recent years as public market gains have been focused on the mega-cap tech companies leading developments in artificial intelligence. Also, fewer PE-backed companies are transitioning into public markets, causing some Limited Partners to find themselves overallocated to Private Equity, therefore limiting new commitments. With expectations of lower interest rates ahead and more attractive underwriting, we believe PE opportunities look more attractive.

This is a summary. Please contact your client advisor for the full Tactical Allocation Viewpoints report.