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Fed Patience is Now a Pivot

The Federal Reserve is taking the controls of a slowing, but (still) growing economy. We believe economic data does not require a sudden easing in monetary policy. Yet, the Fed may be acquiescing to markets spooked by typical late-cycle fears, tepid inflation, and a burgeoning trade war with China.

Does This Look Like a Recession?

Job Market Strength

Initial Jobless Claims Don't Support Layoff Worries1

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At the height of the Great Recession, claims for unemployment hit 661,000.

Solid Wage Growth

Strong Wage Growth Indicates Consumer Health2

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Year-over-year average hourly earnings are at or above three percent for the 10th straight month.

Service Expansion

Any Inkling of a Slowdown Has Not Hit Services3

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ISM data indicates that non-manufacturing sectors are still expanding.

Stratification May Reward Active Managers

Cheaper debt will likely raise real estate values short term, providing the asset class a longer runway for growth. Long term, however, managers must avoid a blind bet on core, as sector potential diverges late cycle. Read our Q2 Real Estate Report.

Industrial

Fundamentals

The darling of commercial real estate, industrial supply remains in check as outsized demand fueled by ecommerce continues to spur growth.


Projected 5-year M-RevPAF

4.80%*

Retail

Fundamentals

We expect low-productivity class-B and class-C malls to face significant bankruptcy risks as consumer preferences shift away from in-person purchases. While demand is also falling in class-A malls, they can deftly intermix online and in-store experiences to help preserve their business models.


Projected 5-year M-RevPAF

-3.40%*

Multifamily

Fundamentals

Affordability is the biggest factor buoying multifamily demand. Wage growth and a tight labor market are pushing more people into the housing market, but single-family home values are still cost prohibitive in and around gateway markets.


Projected 5-year M-RevPAF

2.20%*

Healthcare

Fundamentals

Aging demographics and strong economics are driving demand for senior housing. As Boomers age, they prefer a maintenance-free lifestyle they can now afford thanks to a strong single-family housing market and the financial support of younger children.


Projected 5-year M-RevPAF

3.10%*

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Senior Loan Income Premium to Corporate Bonds

Corporate bond yields reflect the Yield-to-Worst, or the lowest yield generated from the potential take-out dates. Bloomberg. S&P/LSTA Leveraged Loan Index Interest Index (Senior Secured Loans), Barclays U.S. Aggregate Total Return Value Index (Corporate Bonds). 6/30/16-6/30/19. Past performance is not indicative of future results. You cannot invest directly in an index.

Income is Taking Charge

In this environment, investors should look to expand their allocation to income-focused investments to drive returns. If default rates remain muted, senior loans offer an attractive income premium to investment-grade bonds.

View Our Q2 Credit Report +
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