Interest rates rose as market expectations “caught up” with Federal Reserve projections. A strong jobs report and a January inflation reading that was higher than expected influenced the reset. Elevated inflation and a strong labor market were drivers of lower equity returns, as investors digested the data and expectations of further Fed actions grew and REITs took a step back alongside the broader equity market, weakness in office and lodging were large detractors.

Broad asset classes rose higher off 2022 lows on cooling pricing pressures and the possibility of a Fed pause. Equities abroad outperformed amid a declining U.S. dollar and higher than expected growth, and the U.S. debt ceiling has sparked conversation, however the need for a resolution will likely abate an insolvency crisis.

Fixed income investors benefited from declining intermediate and long-dated yields as inflation continued to ease off recent highs and market expectations grew for a Fed rate pause later in the year. Equity markets posted favorable returns in the month. A resilient labor market has helped support a “soft-landing” scenario but lagged effects of monetary policy remain to be seen and REITs had a strong month on the back of falling interest rates and general equity strength.

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Our Quarterly Considerations report includes data on Fourth Quarter 2022 Market Themes, Economic Review, Asset Class Performance, Fixed Income Market, Equity Market, Real Asset Market, Diversification and Financial Markets Performance.

An upward move in bond yields, as continued tightness in the labor market stoked fears of further hikes, weighed on fixed income returns. U.S. equities were lower as broad layoffs and fears of a recession in 2023 induced negative sentiment, and energy prices led commodity markets lower in December amid weak European demand, while real assets drew down in tandem with equities due to weak sentiment.

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Despite another 75 basis points hike by the Fed, lower-than-forecast inflation numbers gave investors hope of a slowdown in future hikes, pushing rates lower and supporting fixed income returns. Promising economic data, such as lower inflation and strong retail sales, aided equity returns across geographies, with domestic markets trailing foreign developed and emerging market equities, and REITs were higher for the month on softening inflation data and positive interest rate-related sentiment.

Equity markets broadly enjoyed a reprieve from September lows, but fixed income and China continue to struggle in the face of a hawkish Fed and investor concerns as President Xi consolidates power.

October brought more pain for investors, interest rates moved higher and the yield curve remained inverted. Domestic and developed markets equities delivered strong returns in October as data revealing a slowdown gave investors hope for a Fed pause and positive equity momentum helped REITs as well, which saw a broad-based rally.

Our Quarterly Considerations report includes data on Third Quarter 2022 Market Themes, Economic Review, Asset Class Performance, Fixed Income Market, Equity Market, Real Asset Market, Marketable Alternatives, Private Equity Market, Diversification and Financial Markets Performance.

While longer term performance remained strong, one-year return calculations have moderated across all private equity strategies. The fundraising environment was competitive and both middle market and emerging managers faced headwinds as allocators prioritized long-standing relationships with larger, more established firms.

A firm stance on fighting inflation from Jackson Hole pushed markets lower as investors wrestle with the impact on the global economy.

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Interest rates rose as markets anticipated a continued hawkish stance from the Federal Reserve in its aim to combat inflation. Bond prices were lower as prices generally move inversely to rates. Equities sold off following the Fed’s Jackson Hole summit as investors digested rhetoric that suggested a firm Fed stance to fight inflation “until the job is done,” and higher interest rates were a headwind for REITs in August. In addition, the asset class sold off with the broader risk-off move of equities.

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Markets eye earnings reports for forward guidance in a challenging environment.

Falling long-term rates were a reprieve for fixed income investors, marking only the second positive month for the Bloomberg U.S. Aggregate Bond Index this year, U.S. equities rebounded sharply in July, fueled in part by better-than-expected earnings reports and a shift in market sentiment that the Fed’s actions may be taking hold to combat inflation as we move into the next year and REITs moved higher, in line with the broader equity market. Lower interest rates and a strong summer travel season buoyed the sector.

Our Quarterly Considerations report includes data on Second Quarter 2022 Market Themes, Economic Review, Asset Class Performance, Fixed Income Market, Equity Market, Real Asset Market, Diversification and Financial Markets Performance.

Anticipation of the Federal Reserve’s rate hike in June pushed rates higher in the first half of the month, but growing concerns of a recession caused rates to revert as the month progressed. Equity markets globally added further to losses in June, ending what has been a difficult first half of the year, and REITs were lower in June as investors repriced risks with higher rates.