Madison Investments

As the Fed’s tightening cycle nears its end, how should investors navigate #FixedIncome markets? Head of fixed income, Mike Sanders, offers an outlook on bonds and key considerations for portfolio positioning. https://lnkd.in/gGNJ8gdz

Last week’s presidential debate brought various political outcomes back into focus for the markets. Read what’s top of mind for our Multi-Asset Solutions team: https://lnkd.in/g-zuxkFQ • India and Mexico have already held elections this year that drove significant volatility in their equity markets. • It's also a busy election year in Europe, with the first of two French elections taking place over the weekend and voters in the United Kingdom set to hit the polls on the 4th of July. • We anticipate that US equity market volatility is unlikely to remain subdued as November approaches. • While we can analyze the market implications of both candidates based on their policy decisions taken over the past eight years, we believe drawing forward-looking conclusions is misplaced. • Rather, we believe it is important to keep the long-term in mind. Understanding where we are in the business cycle will be more consequential than who is in the White House.

Key inflation and economic indicators for the month of May were released this week. Reinhart’s Fixed Income team share their thoughts on what these metrics could indicate for future Fed rate cuts. Read the Week in Review here: https://buff.ly/3XJUQwt Subscribe to Week in Review: https://buff.ly/3SqpeGJ

Are bonds once again serving as a diversifier in a portfolio, or is there a risk of another event like 2022 where both bonds and stocks experienced significant negative returns? Head of Multi-Asset Solutions, Patrick Ryan, joined us for our monthly interview series. Find all of his insights here: https://lnkd.in/gTJvJdFB

Given how long the strength in the dwindling number of mega-cap stocks has persisted, some interesting case studies have come to light. • The S&P 500 Technology sector has produced an impressive return of nearly 28.8% this year (as of Friday’s close), while the two largest ETFs that are built to provide exposure to the sector have lagged by an unusually large margin, returning 19.5% and 18.7% so far this year. • Driving this return differential is a diversification rule that states the combined weight of companies with a weight of more than 4.8% cannot exceed 50%. As such, ETFs tracking the Technology sector are not purely market-cap weighted but instead constructed and constrained to their diversification limits. • The underperformance of the two ETFs can be largely attributed to an underweight to Nvidia, which was roughly half of the 10.6% weight it represented in the market cap-weighted index coming into the year.  Read more: https://lnkd.in/grYTkDiN

Reinhart Fixed Income dives into May’s retail sales not meeting expectations, comments from several Fed members, and the real estate environment in China. Read their Week in Review here: https://buff.ly/3VTwUWr Subscribe to Week in Review: https://buff.ly/3SqpeGJ

Markets cheered as a slew of lower inflation data came through last week in tandem with data pointing to a potentially softer labor market, as this combination could pave the way for lower interest rates. • Since early 2021, inflation has sent prices higher, which has benefited corporate earnings from their ability to pass through increased prices to the end consumer. • An example of this can be seen through the lens of consumer credit usage. On a nominal basis, it has continued to move to record levels; however, when adjusted for inflation, it’s below its pre-pandemic era high. • As the disinflationary process unfolds, it will likely be an incremental headwind to corporate earnings on the margin, as their grip on pricing power could be challenged. • Consensus estimates for S&P 500 earnings growth for this year continue to be above 12% higher than last year’s, which will be increasingly difficult should pricing power begin to erode.  Read this week’s update from our Multi-Asset Solutions team: https://lnkd.in/gKsagmcb

This week the #Fed left the target fed funds rate unchanged. Reinhart’s fixed income team examines what this means for future policy and looks at May’s inflation numbers, plus the snap elections in France. Read the Week in Review here: https://buff.ly/4c018fW Subscribe to Week in Review: https://buff.ly/3SqpeGJ

Head of Fixed Income Mike Sanders joined Jill Malandrino of Nasdaq TradeTalks for a panel discussion on the outlook for the credit market, rate cuts, and inflation. He shared, "Credit spreads and risk assets aren't really pricing in any sort of possibility of a downturn that could adjust values." Watch here: https://lnkd.in/dMU5DbZq #FixedIncome #CreditSpreads #RateCuts

With the #Fed holding interest rates high, Head of Multi-Asset Solutions, Patrick Ryan, shares how this environment has affected businesses and consumers. Watch the full interview here: https://lnkd.in/gTJvJdFB