Market Update

Market Review – Patience & Pragmatism

By June 13, 2024No Comments

Patience & Pragmatism

A back-to-the-basics look at allocating capital efficiently

Key Observations

  • A fixation on the direction of interest rates continues to drive prices in the short term, including in May. Rates moved lower, pushing rate-sensitive asset classes ahead of their peers.
  • However, we take this opportunity to step back from the short-term focus on rates and discuss the findings of our latest long-term study on the efficient allocation of active and passive investing.
  • Notably, 92% of 10-year top-quartile managers spent at least one 3-year period in the bottom half of their peer group, highlighting that success is not linear. We have also added nuance to our review of efficient allocation in markets most likely and profitable to engage in active investing.

Market Recap

Rates, rates, and more rates. Perhaps an over-stylized narrative, but the market is clearly fixated on the direction of rates and the potential for a Fed rate cut. In May, rates moved lower, and there was a modest shift in Fed policy with a slowing of Quantitative Tightening, while maintaining the policy rate. As a result, more rate-sensitive sectors gained ground for the month, with longer-duration bonds outperforming cash, small caps in line with large caps, and REITs shining among real

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