Quarterly Market Outlook - 2Q 2024

The U.S. economy stands out from the crowd.

U.S. growth is downshifting somewhat as lower income households pull back, and corporates face higher refinancing costs. However, with most other global economies still struggling, the U.S. may remain the strongest global performer.

Global disinflation is showing signs of stalling.

After having made significant progress last year, inflation deceleration has flattened out. The last mile of disinflation toward central bank targets would require some economic slowdown and job market rebalancing.

Central banks believe they can cut rates without sacrificing inflation.

The Fed wants to cut policy rates, but it may be fazed by recent inflation surprises. It will likely cut policy rates two times this year, starting in September. Other central banks may also begin easing soon but may cut with greater urgency.

Equities may continue embracing the soft-landing narrative.

The constructive backdrop of solid growth, positive earnings and prospective rate cuts has been fueling market optimism. This mix may also support a broadening of the market rally as rate cuts come closer into sight.

Fixed income yields are relatively attractive compared to equity yields.

U.S. Treasury yields should skew lower as the Fed begins cuts but may be limited by the shallow easing cycle. While credit spreads are tight, providing recession is avoided, they might not widen much and still provide meaningful carry opportunities.

DISCLOSURES

Investment involves risks. Past performance of any particular fund or product mentioned in this document is not indicative of future performance of the relevant fund or product, and the value of the each fund or product mentioned in this document may go down as well as up. You should not invest solely in reliance on this document. There is no assurance on investment returns and you may not get back the amount originally invested.

This material may contain ‘forward looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader.

Equity investments involve greater risk, including higher volatility, than fixed-income investments. Fixed-income investments are subject to interest rate risk; as interest rates rise their value will decline. International and global investing involves greater risks such as currency fluctuations, political/social instability and differing accounting standards. Potential investors should be aware of the risks inherent to owning and investing in real estate, including value fluctuations, capital market pricing volatility, liquidity risks, leverage, credit risk, occupancy risk and legal risk. Non-investment grade securities offer a potentially higher yield but carry a greater degree of risk. Risks of preferred securities differ from risks inherent in other investments. In particular, in a bankruptcy preferred securities are senior to common stock but subordinate to other corporate debt. Emerging market debt may be subject to heightened default and liquidity risk. Risk is magnified in emerging markets, which may lack established legal, political, business, or social structures to support securities markets. Small and mid-cap stocks may have additional risks including greater price volatility. Treasury inflation-protected securities (TIPS) are a type of Treasury security issued by the U.S. government. TIPS are indexed to inflation in order to help investors from a decline in the purchasing power of their money. As inflation rises, rather than their yield increasing, TIPS instead adjust in price (principal amount) in order to maintain their real value. Inflation and other economic cycles and conditions are difficult to predict and there Is no guarantee that any inflation mitigation/protection strategy will be successful. Contingent Capitals Securities may have substantially greater risk than other securities in times of financial stress. An issuer or regulator’s decision to write down, write off or convert a CoCo may result in complete loss on an investment. Real assets include but not limited to precious metals, commodities, real estate, land, equipment, infrastructure, and natural resources. Each real asset is subject to its own unique investment risk and should be independently evaluated before investing. As an asset class, real assets are less developed, more illiquid, and less transparent compared to traditional asset classes.

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Reference number: 3525757