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Modeling the end of the Great Moderation

The past three decades exhibited slow economic growth, declining interest rates and low volatility. Now we are entering a new era.

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May 9, 2022 | 10 minute read

The macro environment of the past few decades—dubbed the Great Moderation—has delivered long business cycles, slowing economic growth and windfalls for investors in equities and fixed income. Recently, a powerful blend of forces has challenged the tenets of the incumbent era, a prospect with huge implications for both the economy and capital markets. In this paper, we examine this critical inflection point and present analysis through our various investment models that were built to navigate such environments.

This information is educational in nature and does not constitute a financial promotion, investment advice or an inducement or incitement to participate in any product, offering or investment. FS Investments is not adopting, making a recommendation for or endorsing any investment strategy or particular security. All views, opinions and positions expressed herein are that of the author and do not necessarily reflect the views, opinions or positions of FS Investments. All opinions are subject to change without notice, and you should always obtain current information and perform due diligence before participating in any investment. FS Investments does not provide legal or tax advice and the information herein should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact any investment result. FS Investments cannot guarantee that the information herein is accurate, complete, or timely. FS Investments makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information.

Any projections, forecasts and estimates contained herein are based upon certain assumptions that the author considers reasonable. Projections are necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the projections will not materialize or will vary significantly from actual results. The inclusion of projections herein should not be regarded as a representation or guarantee regarding the reliability, accuracy or completeness of the information contained herein, and neither FS Investments nor the author are under any obligation to update or keep current such information.

All investing is subject to risk, including the possible loss of the money you invest.

Andrew Korz

Director, Investment Research

Brian Cho, CFA

Managing Director, Head of Quantitative Research, FS Chiron Funds

Lara Rhame

Chief U.S. Economist + Managing Director

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