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Research Review: Q4 2022

Research Review | January 17, 2023

Following October’s robust start to the fourth quarter, performance across the financial markets in November appeared notably strong, underpinned by the growing narrative of a Federal Reserve (Fed) “pause” in tightening over the near-term horizon amid evidence of cooling inflation. The anticipation of a less steep implied Fed policy path helped send the U.S. dollar (USD) significantly lower on the month, and the ICE U.S. Dollar Index (DXY) suffered its worst monthly performance decline since July 2010 with a drop of 5%. Asset classes and categories that tend to perform best during weakening dollar regimes—notably, international equities and precious metals and mining companies—witnessed significantly positive returns on the month. Within global equity, emerging markets were the leaders of the pack, with tailwinds including a weaker dollar and elevated performance across Chinese equities amid indications of a relaxation of China’s zero-COVID policy. Bond returns were also broadly positive in November— particularly among rate-sensitive sectors, as interest rates declined on the month in line with the “peak inflation” tone. Most major real assets sectors also enjoyed positive returns for the month, with many corners of the real assets complex generating double-digit gains.

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Research Review: November 2022

Research Review | December 16, 2022

Following October’s robust start to the fourth quarter, performance across the financial markets in November appeared notably strong, underpinned by the growing narrative of a Federal Reserve (Fed) “pause” in tightening over the near-term horizon amid evidence of cooling inflation. The anticipation of a less steep implied Fed policy path helped send the U.S. dollar (USD) significantly lower on the month, and the ICE U.S. Dollar Index (DXY) suffered its worst monthly performance decline since July 2010 with a drop of 5%. Asset classes and categories that tend to perform best during weakening dollar regimes—notably, international equities and precious metals and mining companies—witnessed significantly positive returns on the month. Within global equity, emerging markets were the leaders of the pack, with tailwinds including a weaker dollar and elevated performance across Chinese equities amid indications of a relaxation of China’s zero-COVID policy. Bond returns were also broadly positive in November— particularly among rate-sensitive sectors, as interest rates declined on the month in line with the “peak inflation” tone. Most major real assets sectors also enjoyed positive returns for the month, with many corners of the real assets complex generating double-digit gains.

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Research Review: October 2022

Research Review | November 14, 2022

The concluding quarter of 2022—one of the most tumultuous calendar years across financial markets in recent memory—started strong for risk-seeking investors, particularly those emphasizing domestic markets. While some of this strength has since dissipated in the early trading activity of the first half of November, performance across the major asset classes and categories mostly reflected a risk-on tone in October. The Federal Reserve’s (Fed’s) 75-basis-point increase to the policy rate on November 2, as well as hawkish near-term forward guidance, affirmed the Fed’s steadfast pursuit of restoring price stability amid the most severe cost of living crisis since the early 1980s.

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Research Review: Third Quarter 2022

Research Review | October 18, 2022

The third quarter of 2022 provided little respite for investors hoping to see a change in trend across the financial markets after significant downside volatility in the year’s first half. While a relief rally was witnessed in July, the positive sentiment spanning both risk-oriented and high-quality assets during the month reversed course in August and September, with most major equity index levels establishing fresh year-to-date lows and interest rates ascending to the highest level in more than a decade. Stubbornly high inflation, historically tight labor market conditions, and a continued imbalance between aggregate demand and available supply were critical factors behind increased tightening efforts by the Federal Reserve (Fed) during the quarter.

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Research Review: August 2022

Research Review | September 16, 2022

In late August, the Fed hosted its annual economic symposium in Jackson Hole, Wyoming, culminating in a brief speech by Chair Powell. In his remarks, the chairman shared three lessons learned from the management of monetary policy during the last high inflationary environment from the 1970s and 1980s. His third lesson, “…we must keep at it until the job is done,” invoked a sense of Volcker-era inflation-fighting resolve.

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Research Review: July 2022

Research Review | August 17, 2022

Investors breathed a sigh of relief in July amid rebounding performance across most major asset classes and categories, despite confirming evidence of a slowdown in U.S. economic activity and a further tightening of monetary conditions by the Federal Reserve. Performance themes during the month favored the rate-sensitive corners of the financial markets—bucking the trend that has generally been in place for the past year—as interest rates declined sharply.

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Research Review: Second Quarter 2022

Research Review | July 15, 2022

Traditional asset classes and categories declined sharply in the final month of the second quarter, capping off one of the most challenging first six months of a calendar year in recent memory, as global equities, core and high yield bonds, and real estate investment trusts (REITs) posted double-digit losses through the first two quarters of 2022. Following a modest contraction in GDP growth in the first quarter, estimates for second-quarter growth evolved to reflect the potential for a further contraction in economic activity, suggesting the U.S. economy may be in the midst of a recession.

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Research Review: May 2022

Research Review | June 17, 2022

A general sense of unease continued to weigh on U.S. consumers in May, despite a settling in financial market volatility. The continued sharp increase across energy prices helped drive gasoline prices to the highest level in at least two decades, with the national average for a gallon of regular unleaded nearing $5.00. More generally, inflation rates across both headline and core—i.e., excluding food and energy—gauges remained near 40-year highs, although headline consumer price inflation experienced a slight moderation through April before increasing again in May.

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Research Review: April 2022

Research Review | May 17, 2022

Volatility spiked meaningfully in April and continued into early May as the U.S. government reported an unexpected contraction in economic activity in the first quarter, and the Federal Reserve hiked the federal funds rate by 50 basis points, the first hike of this size since 2000. Performance across the major asset classes and sub-asset categories was overwhelmingly negative, particularly among rate-sensitive sectors, a dominant theme across the financial markets since mid-2021.

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Research Review: First Quarter 2022

Research Review | April 18, 2022

Multi-decade high inflation, the interest rate liftoff by the Federal Reserve (Fed), sharply rising energy prices, and Russia’s invasion of Ukraine were a few of the key drivers behind the spike in volatility across the financial markets in the first quarter of 2022. Despite a general sense of unease, the month of March presented global asset allocators with performance gains across most major domestic equity and real assets sectors, while bond returns continued to face headwinds in the way of rising interest rates.

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