On the Minds of Investors

How will the COVID recovery compare to the Financial Crisis recovery?

Comparing the recoveries of the global financial crisis (GFC) and the pandemic recession is like comparing the tortoise and the hare: the aftermath of the former was slow and steady, while the latter should experience a burst of speed ahead. 

How might the TGA drawdown impact markets?

Among the many considerations the Federal Reserve (the Fed) has to take in managing monetary policy, the behavior of the Treasury Department can be one of the more challenging. The Treasury Department holds its cash on deposit in the Treasury General Account (TGA) at the Fed.

Is a market correction coming?

Most investors believe that the reflation trade will define markets in 2021. This means that cyclical sectors should outperform defensive ones, international stocks should outperform their U.S. counterparts, long-term interest rates should rise, and the U.S. dollar should fall. However, more and more clients are asking us what could undermine this narrative and precipitate a market correction.

Is the recent outperformance of international stocks sustainable?

International equities have underperformed the U.S. by a cumulative 189% over the past 13 years (in U.S. dollars). Unsurprisingly, many investors are underweight international, with the average portfolio analyzed by our Portfolio Insights team showing a 22% weighting to international equities (versus a “neutral” 35%). Investors should always look forward: a new global economic cycle is beginning in which international can take the baton from the U.S. due to: valuations, U.S. dollar, and cyclicality. Since early November, when vaccine trial results were first announced, international has outperformed the U.S. by 3.9%pts – only the beginning of the rotation.

How has COVID-19 impacted retirement strategies?

For many Americans, 2020 presented significant financial challenges as sweeping lockdowns led to soaring job losses, and even though some government support was provided to cushion the blow, millions had to adjust their spending behaviors. In April alone, we saw an overall reduction in spending between 20-50% depending on wealth level for both steady earners and retirees. While no one could have predicted how the pandemic would create financial challenges for so many people, the reality is many could have been better prepared if they had budgeted for emergency situations.

How is the vaccine rollout progressing?

Following several consecutive announcements of vaccine candidate success in November 2020, markets began pricing in an end to the COVID-19 pandemic. Shortly after these vaccines were deemed effective, many were fast-tracked for approval by governments around the world, and vaccination programs began in earnest in December of last year. Now, in the second month of 2021, many investors may be wondering: how is the vaccine rollout progressing, and how close is the pandemic to being over?

What is going on with the retail investor?

The past few weeks have seen incredible market action, as retail investors piled into highly shorted small cap equities in an effort to push back on the institutional investment community.

What can we expect in Biden’s first 100 days?

Inauguration day starts the clock on the first 100 days of a new administration, a symbolic benchmark period to measure early success. During the first 100 days, we anticipate another fiscal package, a pivot on foreign policy, trade and regulation, and a preview of future recovery spending.

How much higher can Treasury yields climb?

Treasury yields have climbed above 1% and investors are asking how much higher Treasury yields could climb in 2021.

When will U.S. debt become unsustainable?

With U.S. federal debt at 100.1% of GDP, the highest since World War II and rising, investors often wonder what the breaking point could be of mounting U.S. debt. The critical consideration to examine is not actually the level of debt or the ratio of debt to GDP, but rather the cost of servicing the debt. The chart on the left shows national debt soaring (gray), but the interest rate paid on that debt coming down sharply in recent decades (light blue).