Markets sidestepped a range of concerns last year as investors focused on the benefits of synchronized global growth over thorny issues that could have dampened investor sentiment. These included persistent tensions with North Korea, falling oil prices early in the year and the end of the Fed’s quantitative easing policy.
2018 has proven to be a different environment for investors. This week’s chart shows stark differences in performance for U.S. equity and fixed income markets in 2017 and 2018. Equity markets rose steadily through the first half of 2017 and ended the year by posting gains of over 20%. Returns for traditional fixed income investors, while muted, were still positive.1
This year, however, equity and fixed income returns are tracking far below those of last year. Bond returns have turned negative while U.S. equity markets have largely remained flat since January 2018.1
As we first wrote nearly a year ago, we continue to believe a traditional 60/40 portfolio faces significant headwinds in the coming years due to changing market conditions. Looking forward, investors may increasingly need to find alternative sources of income and growth to help achieve their financial goals.
This week’s chart looks at return drivers for middle market buyout transactions, which have generated higher realized capital multiples than large cap and may favor middle market managers looking forward.
