June 2023 capital markets outlook and risk metrics
Although some global inflation indicators continued to improve in May, central banks signaled their readiness to continue to hike interest rates, which weighed on bond markets and economic growth expectations.
Confidence in China’s economic reopening waned, as foreign investors shed their positions in Chinese equities. The MSCI China index fell 8.4% in May and is down 14.8% on a one-year annualized basis.
The MSCI Emerging Market index outperformed Chinese stock markets and developed non-US equity markets.
After a strong start to the year, developed non-US markets printed negative returns in May.
The US equity market had mixed results in May. Mega cap and large cap technology companies benefited from an AI-fueled burst of investor enthusiasm while small and mid-cap stocks posted negative returns.
Investors continued to favor growth stocks with the Russell 1000 Growth index posting a 20.8% return year-to-date while value stocks struggled with negative returns.
Deteriorating growth expectations weighed on commodity prices in May, with natural resource stocks suffering a steep sell-off. Infrastructure and real estate equities decline during the month as well.
Most fixed income markets posted negative returns in May with the notable exception of short-dated T-bills as uncertainty regarding future policy rates and inflation dampened enthusiasm for bonds.
The Fed’s statement in May offered some potential for a pause in the rate-hiking cycle, but subsequent economic data appear to indicate continued economic demand and tight labor markets that could indicate the need for still higher rates in the future.
Welcome to Meketa’s Thought Leadership for Institutional Investors
You must review and accept the following Terms and Conditions in order to view the following educational/thought leadership materials (“Materials”).
Materials are for general information and educational purposes only and must not be considered investment advice or as a “recommendation” regarding any course of action, including without limitation as those terms are used in any applicable law or regulation. Any such advice must be tailored to your situation and objectives. The receipt or the use of Materials shall not create a client-advisor relationship.
Materials and their content may not be modified, sold, or otherwise disclosed, in whole or in part, to any other person or entity without Meketa’s prior written permission.
Significant events may occur (or have occurred) after the date of Materials and that it is not our function or responsibility to update Materials. All investments involve risk. There can be no guarantee that any of the strategies, tactics and methods discussed in Materials will be successful.
We do not purport to, and do not, in any fashion, provide tax, accounting, actuarial, recordkeeping, legal, broker/dealer or any related services. You should consult your advisors with respect to these areas and the information presented in Materials. You must exercise your own independent judgment when adopting or following any of the strategies, tactics and methods discussed in Materials.
All information contained in Materials is provided “as is,” without any representations or warranties of any kind. Meketa Investment Group, Inc. or other associated and affiliated companies assume no liability as regards to any investment, divestment or retention decision taken on the basis of Materials. We disclaim all express and implied warranties including those with respect to accuracy, completeness, timeliness or fitness for a particular purpose. We assume no responsibility for any losses, whether direct, indirect, special or consequential, which arise out of the use of Materials.
Information used to prepare Materials was obtained from external sources. While we have exercised reasonable care in preparing Materials, we cannot guarantee the accuracy, adequacy or completeness of any such information contained therein.
Any securities referred to in Materials may not be eligible for sale in some jurisdictions. Materials may not be redistributed to persons resident in any country, state or territory where such distribution would be contrary to applicable law or regulation.
Nothing in Materials should be interpreted to state or imply that past results are an indication of future performance. Investing involves substantial risk. It is highly unlikely that the past will repeat itself. Selecting an investment, or investment tactic, method or strategy based solely on past returns is a poor investment strategy. Past performance does not guarantee future results.
Investments or investment tactics, methods or strategies discussed in Materials are speculative and involve a high degree of risk and are intended only for experienced and sophisticated institutional investors. Materials do not list, and do not purport to list, the risk factors associated with any investment or investment tactic, method or strategy discussed therein.
Materials do not provide tailored investment advice, and do not take into account the recipient’s particular financial situation, existing holdings or liabilities, investment knowledge and experience, investment objective and horizon or risk profile and preferences. The recipient must particularly ensure the suitability of an investment or investment tactic, method or strategy, as regards its financial and fiscal situation and investment objectives. The recipient bears the risk of losses in connection with an investment or investment tactic, method or strategy. Before acting on any information in Materials, it is recommended to consult one’s investment, legal and/or tax advisers. The information contained in Materials does not constitute advice on the tax consequences of making any particular investment decision or the adoption or following of any investment tactic, method or strategy. The recipient shall make its own appraisal of the tax and other financial merits.