Insights

Reproduced with permission from AllianzGI Two-Minute Tech

Capital markets have responded positively to better-than-expected economic outcomes so far this year. While the United States has managed to avoid an official recession, growth is almost certain to slow and increases in profits will be challenged. Given this backdrop, we see equities trading sideways to slightly higher in the near term and we continue to favor the U.S. over the rest of the world.

We aren’t overly concerned about U.S. regional bank debt despite Moody’s ratings actions

The ratings cut on U.S. Treasuries presents an uncomfortable reality about the United States’ long-term fiscal stability, but it’s not a doomsday scenario.

Plan sponsors often find the target date fund (TDF) selection process understandably daunting. Evaluating TDFs is a multi-faceted process that requires a deep dive into the four components of TDF design — glide path design, asset allocation, selecting underlying managers, and portfolio construction.

It is critical for plan fiduciaries to understand the differences in target date design in order to select the fund that best matches the needs and characteristics of their plan and its participants.

Experienced active managers can capitalize on opportunities that fall outside their benchmarks and can manage unwanted concentrations. This has historically resulted in relatively high success rates in generating alpha.

Another regional bank falls, but the markets are seeing the forest from the trees as challenges appear contained.

An unexpected shock in the banking sector has stress-tested the economy and policymakers. Both initially passed. But the impact on lending and credit conditions remains unclear and increases the likelihood of a mistake by the Fed going forward.

Moving away from an abnormal regime of crisis-era stimulus won’t be a smooth process. But the volatility should be easier to stomach knowing that the destination is likely to be a healthier, more balanced economy.