Aggregate spending is a bit above the long-term trend, so we expect the spending dynamic to change as consumers continue to make important choices. As personal income goes positive as inflation cools over time, positive spending and saving dynamics will emerge.
Key Points:
Johnson & Johnson has spun out a portion of its consumer brands division
Stable, predictable brands should thrive as the economy decelerates
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A key mega trend our team is excited about is the migration of assets to alternative asset managers. Within the asset management industry, the alternatives category is growing fast and with significant room to expand. The "smart money," which includes foundations, endowments, pensions, sovereign wealth funds, and insurance companies, have been investing in private markets for decades and between 20-40% of their total portfolios are still invested in this category today. The high-net-worth and private wealth markets have been much slower to adopt the private markets, but meaningful asset growth has begun while still being only roughly 2-4% of a typical HNW portfolio. Although they should, I do not expect the retail market to begin allocating like the smartest institutions. However, from where we sit today, there is still meaningful growth ahead in this channel. A recent Evercore ISI report shows each incremental 1% allocation from the wealth management platforms would mean $100 billion of additional assets to alternative managers. That's powerful stuff.
In my opinion, true active strategies have a very important role in portfolios as complements to passive, cheap beta. Advisors need to understand what they own.
October was marked by continued volatility across fixed income and equity markets as investors faced various challenges, including persistent inflation concerns, rising yields, tightening monetary policy, and the backdrop of a U.S. Presidential election.
As an investor, it’s nice to know what we should expect from President Trump, because we have seen the movie before in 2017 – 2021. Apart from the early part of the Pandemic period, the economy and stock markets generally performed well.
Remember, our investment in stocks is a De facto vote of confidence on the economies in which we invest. Earnings, revenue, margins, free cash flow, and the growth of these important metrics is what drives stocks up or down over time.
The discretionary sector struggled as did all growth and quality-oriented areas of the market in 2022. That was a classic re-set and a raging opportunity to add exposure.
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