AlTi - Alvarium Tiedemann

Quarterly Market Update and Outlook | July 2023

By Nancy Curtin Published July 3, 2023

Read the highlights from our Quarterly Market Update and Outlook. For more detail, please download the full commentary below.

A strong quarter for stock market returns; positive for other risk assets.

  • The second quarter saw strong gains across global equities, led by the US. The S&P 500 rose 8.3%, its biggest quarterly advance since the fourth quarter of 2021.
  • Through June 30, the S&P 500 gained 16.9%, its best first half since 2019. Global markets were also strong but lagged the US.
  • US stock market gains were highly concentrated 7: technology companies accounted for the lion’s share of the S&P’s return.
  • Bond returns were driven mainly by income as intermediate and long duration government bond yields were mostly unchanged.
  • On the Diversified asset side, gold, high yield bonds and hedge funds had modest gains.

Lots of good news everywhere in the face of investors cautiously positioned.

  • Sentiment was highly bearish entering 2023 and many investors lightened their equity exposure in favor of attractive cash yields.
  • We had continued to maintain that 2023 would be a good year for risk assets and that investors should remain fully invested.
  • The second quarter took many by surprise as was marked by significantly better news versus expectations: resilient growth, lower inflation, excitement around Generative AI, less banking stress, and resolved US debt deal.
  • Good news sent investors and strategists scrambling to adjust positions.

Does this mean continued strength in risk assets ahead?

  • After strong gains, the US market needs to consolidate, and breadth needs to widen.
  • We still believe the US economy will slow into the back end of this year as Central Banks continue to tighten. Liquidity may be pressured by reduced lending.
  • Risks to near term economic and earnings growth remain.
  • However, when the S&P 500 gains more than 10% in the first half, the rest of the year tends to be positive (albeit with volatility).

An improving picture as we look forward to 2024.

  • We weigh the above near-term concerns with our more optimistic forward-looking view into 2024.
  • The global economy may slow but from a higher base, providing more resilience than expected.
  • We believe inflation will continue to ease as the year progresses.
  • Hence, we think the worst of the 2022 bear market is behind us.

Download our full commentary below.

About the author
  • Nancy Curtin

    Nancy Curtin sits on AlTi’s Board of Directors and is our Global Chief Investment Officer. She is also a member of the firm's Executive Committee. She has held Global CIO, Head of Investments and senior C-suite leadership roles at multiple firms since 2002, including Fortune Asset Management, Close Brothers Asset Management and Alvarium Investments

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The 10-YEAR TREASURY YIELD INDEX measures the return on investment, expressed as a percentage, on a debt obligation (note) issued by the United States government with a maturity of 10 years upon initial issuance.

The 5-YEAR TREASURY YIELD INDEX measures the return on investment, expressed as a percentage, on a debt obligation (note) issued by the United States government with a maturity of 5 years upon initial issuance.

ASSET ALLOCATIONS: Tiedemann will change asset allocations over time and from time to time. Changes to the asset allocations may cause the Targeted Asset Class Returns to change, perhaps materially.

ALERIAN MLP TR U.S.D INDEX measures the performance of energy segment U.S. equity securities. It is a composite of the most prominent energy Master Limited Partnerships (‘MLPs’). The index is calculated using a float-adjusted, capitalization-weighted methodology.

BLOOMBERG MUNI INTER-SHORT 1-10 TR INDEX measures the performance of tax-exempt municipal bonds with more than one year and less than ten years remaining until maturity.

BLOOMBERG AGGREGATE BOND INDEX is an unmanaged broad base index comprised of intermediate term, investment grade bonds including Treasury bills, Government agency bonds, mortgage-backed bonds, Corporate bonds, and foreign bonds. The index is considered representative of the fixed income market as a whole.

BARCLAYS U.S. TIPS is an unmanaged index comprised of U.S. Treasury Inflation Protected Securities with one or more years remaining maturity with total outstanding issue size of $500mm or more and measures the performance of U.S. TIPS market.

BARCLAYS MUNI 1-YR is an unmanaged index comprised of investment grade, tax-exempt Municipal bond issues with maturities of one to two years, and is considered representative of the short-term Municipal bond market.

BARCLAYS MUNI 5-YR is an unmanaged index comprised of 4–6-year duration, fixed-rate, intermediate-duration, tax-exempt bonds representative of the municipal bond market of intermediate duration.

BLOOMBERG HIGH YIELD MUNICIPAL BOND INDEX is an unmanaged index composed of non-investment-grade, unrated, or rated below Ba1 bonds.

BLOOMBERG U.S. CORPORATE HIGH YIELD BOND INDEX measures the U.S.D-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch and S&P is Ba1/BB+/BB+ or below. Bonds from issuers with an emerging markets country or risk, based on the indices’ EM country definition, are excluded. The U.S. Corporate High Yield Index is a component of the U.S. Universal and Global High Yield Indices.

CRSP U.S. MEGA CAP GROWTH INDEX classifies growth securities using the following factors: future long-term growth in earnings per share (EPS), future short-term growth in EPS, 3-year historical growth in EPS, 3-year historical growth in sales per share, current investment-to-assets ratio, and return on assets.

DEBT TO EQUITY RATIO: a company's total long-term debt divided by total shareholders' equity. The result is a measure of a company's leverage.

ETF: An exchange traded fund (ETF) is a type of security that involves a collection of securities—such as stocks—that often tracks an underlying index, although they can invest in any number of industry sectors or use various strategies. ETFs are in many ways similar to mutual funds; however, they are listed on exchanges and ETF shares trade throughout the day just like ordinary stock.

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FTSE TREASURY BENCHMARK 10-YEAR is a market value-weighted index of public obligations of the U.S. Treasuries with maturities of ten years. The Index reflects no deduction for fees, expenses or taxes.

FTSE WORLD GOVERNMENT BOND INDEX (WGBI) measures the performance of fixed-rate, local currency, investment-grade sovereign bonds. The WGBI is a widely used benchmark that currently includes sovereign debt from over 20 countries, denominated in a variety of currencies, and has more than 30 years of history available. The WGBI provides a broad benchmark for the global sovereign fixed income market. Sub-indexes are available in any combination of currency, maturity, or rating.

HFRX ABSOLUTE RETURN INDEX is designed to be representative of the overall composition of the hedge fund universe. It is comprised of all eligible hedge fund strategies; including but not limited to convertible arbitrage, distressed securities, equity hedge, equity market neutral, event driven, macro, merger arbitrage, and relative value arbitrage.

JPMORGAN GBI EM INDEX is an index comprised of emerging market government debt denominated in local currencies.

*KBW Bank Index: This is a modified cap-weighted index consisting of 24 exchange-listed National Market System stocks, representing national money center banks and leading regional institutions.

MERRILL LYNCH HIGH YIELD MASTER II INDEX is an unmanaged index that tracks the performance of below investment grade U.S. dollar-denominated corporate bonds publicly issued in the U.S. domestic market.

A mortgage-backed security (MBS) is an investment similar to a bond that is made up of a bundle of home loans bought from the banks that issued them.

MSCI ACWI INDEX captures large and mid cap representation across 23 Developed Markets and 27 Emerging Markets countries.

MSCI CHINA INDEX is constructed based on the integrated China equity universe included in the MSCI Emerging Markets Index, providing a standardized definition of the China equity opportunity set. It captures large- and mid-cap representation across China A shares, H shares, B shares, Red chips, P chips and foreign listings (e.g., ADRs). With 704 constituents, the index covers about 85% of this China equity universe. Currently, the index includes Large Cap A and Mid Cap A shares represented at 20% of their free float adjusted market capitalization. China A shares will be partially included in this index, making it the de facto index for all of China.

MSCI EAFE is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada.

MSCI EM is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of emerging markets.

MSCI U.S. REIT Index is a free float-adjusted market capitalization weighted index that is comprised of equity Real Estate Investment Trusts (REITs).

OPERATING MARGIN measures how much profit a company makes on a dollar of sales, after paying for variable costs of production, such as wages and raw materials, but before paying interest or tax. It is calculated by dividing a company’s operating profit by its net sales.

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RU.S.SELL 2000 is a market cap-weighted index that measures the performance of the small-cap segment of the U.S. equity universe. It includes approximately 2000, or 10% in total market-capitalization, of the smallest securities of the Russell 3000 based on a combination of market cap and current index membership.

S&P 500 INDEX consists of approximately 500 stocks chosen for market size, liquidity, and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large-cap universe.

SPDR Barclays Capital High Yield Bond ETF is designed to measure the performance of publicly issued U.S. dollar denominated high yield corporate bonds with above-average liquidity.

US Consumer Price Index Shelter: The index for the service that a housing unit provides its occupants. Owners’ equivalent rent of residences and rent of primary residence measure the majority of the change in the shelter cost consumers experience.

Zillow Observed Rent Index (ZORI): A smoothed measure of the typical observed market rate rent across a given region. The index is dollar-denominated by computing the mean of listed rents that fall into the 40th to 60th percentile range for all homes and apartments in a given region, which is once again weighted to reflect the rental housing stock.

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