An assessment of third-quarter performance across asset classes, with focus on volatility patterns in public equities, fundraising dynamics in private equity, and near-term macro catalysts.
From the original report
Selected passages from the original publication. Historical observations reflect the report's publication date, not current market advice.
1) Is Goldilocks at home? – While non-tariff-based inflation has been stabilizing, and the labor market is colling off, economic growth has thus far been resilient. These dynamics (named after the famous bear-tormentor) create a favorable environment that can allow businesses to grow without cost pressures. Recent market strength has anticipated this.
2) Too much of a bad thing – Consumer confidence measures are weak, and the rate of unemployment is slowly grinding higher. There is a risk that the weak jobs picture could begin to feed back into consumption. We haven’t seen this yet but are watching for it. The good news is that there is ample room to cut interest rates and restimulate a moribund real estate sector, which can cushion labor markets should the hiring slowdown accelerate.
3) Peak Politicizing? – With the calendar soon turning to a midterm elections year, we may see a moderation of politicized behavior (e.g. the “Shutdown Showdown”), as both parties turn to campaigning. The debt limit increase provided an example where an issue was deferred to 2027, clearing the calendar of election year confrontation. It may seem hard to fathom at present, but it is possible that US politics could recede as a volatility driver.
The end of the rainbow? – It would be hard not to mention gold again after such a stunning month for the shiny metal (as seen above). One can add falling interest rates to a substantial list of tailwinds that includes central bank buying, political / geopolitical volatility, government debt concerns and a falling USD. Barring commodity inflation, the backdrop for gold could hardly be better. We are managing our exposure by periodic rebalancing, through which we trim gains and buy dips.
Less reward for your risk – As seen above credit spreads have ground back down to recent lows, and there is little upside in public markets from spread compression. Yields are a bit more attractive in private credit, and we still allocate to the asset class strategically. That said it is likely not the time for a tactical overweight.
For educational purposes only; not individualized investment, tax, or legal advice. Investing involves risk, including loss of principal.
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