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Insight Investment - Fri, 03/01/2024 - 19:58

Global macro research: asset returns post rate peaks

Rate expectations have changed dramatically and, although markets appear to have got ahead of themselves, inflation is moderating, and growth has slowed, which supports the view that the hiking cycle is over.

If the Fed’s July 2023 rate hike was the last in this cycle, then the asset class returns in the intervening period have been poor by historic standards (see Figure 1 and 2), although the end of 2023 saw a significant upswing. The pace of rate cuts currently priced into markets leaves open the possibility of periodic bouts of volatility as rate expectations re-adjust to a more realistic path, but history does suggest that equity and fixed income markets may continue to make gains into 2024. At some stage, we expect the equity/bond relationship will become less correlated, thereby providing more of a source of diversification in cross-asset portfolios, but this may take time to reassert itself.

Figure 1: Historical performance of US equities after interest rates peak

Insight Investment

Source: Insight and Bloomberg. Data as of December 29, 2023. US equities is the S&P 500 Index, US Treasuries is the 10-year Treasury. Past performance is not indicative of future results.

Figure 2: Historical performance of US Treasuries after interest rates peak

Insight Investment

Source: Insight and Bloomberg. Data as of December 29, 2023. US equities is the S&P 500 Index, US Treasuries is the 10-year Treasury. Past performance is not indicative of future results.

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Insight Investment

Insight is a global asset manager specializing in fixed income and risk management strategies with over $825bn in AUM. We have been working with insurers since 1934 and manage more than $32bn for over 80 insurers globally. Our investment philosophy offers clients innovative yet practical investment solutions. We manage custom fixed income strategies to help meet clients evolving needs, such as liquidity, principal preservation, earnings stability, tax minimization and total return.

Insight is subsidiary of BNY Mellon, which offers insurance clients additional services and access to boutique investment management teams. These services offer the potential for deeper collaboration across your portfolio.

AUM as of December 31, 2023. Assets under management (AUM) represented by the value of the client’s assets or liabilities Insight is asked to manage. These will primarily be the mark-to-market value of securities managed on behalf of clients, including collateral if applicable. Where a client mandate requires Insight to manage some or all of a client’s liabilities (e.g. LDI strategies), AUM will be equal to the value of the client specific liability benchmark and/or the notional value of other risk exposure through the use of derivatives. Regulatory assets under management without exposures can be provided upon request. Unless otherwise specified, the performance shown herein is that of Insight Investment (for Global Investment Performance Standards (GIPS), the ‘firm’) and not specifically of Insight North America. A copy of the GIPS composite disclosure page is available upon request.

Jeffrey Berman

Head of North America Distribution 
Jeffrey.Berman@insightinvestment.com
+1 212 365 3341 
200 Park Avenue, New York, NY 10166 
www.insightinvestment.com

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