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.

Q2 2024 witnessed a stark market divergence. Mega-cap stocks, fueled by AI enthusiasm, drove S&P 500 gains while small caps faltered. The bond market grappled with challenges in Q2, as rising Treasury yields dampened overall performance. Meanwhile, emerging market equities shone brightly, particularly in India, Taiwan, and South Korea. Their tech sectors rode the AI wave and made EM equities one of the top performers of the quarter despite China’s economic headwinds. The Federal Reserve maintained its cautious stance, holding rates steady in June as it navigates complex economic signals, including a labor market that has been sending mixed signals and sticky inflation. Meanwhile, the housing market continues to undergo a dramatic shift, with falling existing and new home sales potentially foreshadowing broader economic challenges ahead.