Research roundtable: Q2 2023 outlooks

In this episode of FireSide, the Investment Research team takes stock of Q1’s performance and offers their outlooks for Q2.

About this episode

In this episode of FireSide, the Investment Research team takes stock of Q1’s performance and offers their outlooks for Q2. After an eventful Q1 marked by bank failures, more tech layoffs, and other concerning headlines, the Investment Research Team explores some bright spots and adds nuance to their market evaluations. Join Rob Hoffman, Managing Director; Lara Rhame, Chief U.S. Economist; and Andrew Korz, Director, as they cover updates in the credit, macro and commercial real estate sectors.

Transcript excerpt:

Rob Hoffman (00:04):
Welcome back to FireSide, a podcast from FS Investments. My name is Robert Hoffman and I’m the head of the investment research team here at FS. As the quarter rolls over and we head into Q2 of 2023, we always like to take stock of where we’ve been and where we think we’re going over the course of the next quarter.

Given how fast markets have been changing, I feel like that’s a statement we’ve been making more and more often since the early days of the pandemic. It’s worth mentioning that we’re recording on April 11 and our written outlooks covering macro, real estate, and credit should all be available on the website, if you want to dive deeper into some of the stats and themes we’re going to talk about today. But let’s set the stage because a lot has happened in the first quarter. For markets, stocks are up almost 7.5% in the U.S. The Bloomberg Agg is up 4%, high yield and bank loans up 3.5% each.

Seems like a pretty good year for investors, right? So far, straight up, but let’s see… Fixed income is up because yields have plunged. The first quarter saw the largest bank failure since the financial crisis. Fixed income volatility has exploded and was higher than the pandemic frenzy in 2020.

It’s close to the highs of the financial prices. The Fed, and I know we will talk about this, raised rates in March and may raise again in May. So, there is still a lot of policy uncertainty, but this economy seems to be chugging along with a strong labor market and GDP, that is expected to be around 3% in the first quarter.

There’s clearly a lot to dig into today, and for these research roundups as we like to call them, I am joined by my partners and colleagues on the research team, Lara Rhame, our Chief US Economist, and Andrew Korz, our Director of Research [00:02:00] overseeing equities and real estate. Welcome everybody.

Before diving into our forward-looking thoughts, it’s probably worth mentioning where we’ve just been. And to do that, I thought it might be fun to do it in the context of if you were surprised or not surprised by what has transpired to date. So Lara, recap for us what we’ve seen in the macro economy to start the year, and have you been surprised or not surprised by what’s played out so far?

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, CFA

Executive Director, Investment Research

Lara Rhame

Chief U.S. Economist + Managing Director

Robert Hoffman, CFA

Managing Director, Credit Wealth Solutions