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The Family Office Co. B.S.C (c) is licensed as a category 1 Investment Firm by the Central Bank of Bahrain C.R.No.53871 dated 21/6/2004. Paid Up Capital: US$ 10,000,000. P.O. Box 18024, Manama, Bahrain.

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Fundamentally, the global economy is in a more optimistic state than many might have dared to hope a few years ago.

Recession has been avoided in major economies, the battle with inflation has seen major progress, and the markets have so far adjusted to the various geopolitical crises. In particular, analysts are happy with the state of the US economy, with most predicting a ‘soft landing’ (i.e. no recession forecasted next year).

But there are also factors to consider as we look toward the future.

First, the ongoing conflicts in Ukraine and the Middle East bring some uncertainty. In addition, major disruption to global trade routes could lead to resurgent commodity prices and imperil the solidifying yet fragile economic status quo.

Second, China faces challenges to its growth, with consumer demand softening and its housing market experiencing pressures. As a key driver of global economic growth, these developments in China introduce some uncertainty, particularly if shifts in trade policy were to re-emerge. Meanwhile, China has launched a significant economic stimulus initiative focused on achieving the government’s 5% growth target. This effort aims to boost consumer demand and promote steady, sustainable growth in retail sales. 

Overall, there are promising signs for growth stabilization in the world’s second-largest economy, supported by recent stimulus measures and encouraging indicators like retail sales and industrial production.

In addition, the fiscal imbalances in many developed economies, including the US, UK, and Japan, imply that government spending cannot be expected to bolster growth as it has done in the past few years.

The presence of various potential major disruptions, coupled with a lack of obvious fiscal or monetary options for governments to mitigate them, has put 'volatility' at the forefront of everyone's mind. Simply put, market conditions may be subject to swift and unpredictable shifts.

Almost all the analysts surveyed, therefore, recommended the need for building a portfolio capable of withstanding volatility.

This includes seeking out investments in counter-cyclical sectors - such as farmland, energy, and infrastructure - which often have substantial pre-existing government commitments (especially in the context of green initiatives).

It also includes sectors driven by long-term, structural factors such as the aging population (e.g. senior housing and associated medical services).

This does not, however, mean a wholesale ‘flight to safety’, or in portfolio terms, adopting a wholly “defensive” strategy. Rather, it means prioritizing flexibility and agility and keeping a foot in both camps.

Being flexible means that one can take advantage of growth opportunities as well as stable, “safer” bets.

And, as always, diversification remains key. The broader your universe of investing possibilities, the better your chances of weathering a storm of volatility. We’ve 

 that private markets investments are a highly effective means of achieving diversification beyond public markets.

Various commentators explicitly singled out private markets as among the areas of potential growth for investors who are prepared to be proactive in seeking out individual opportunities.

While we recommend reading the available research, it is important to remember that global-level insights are informative but not typically ‘actionable’, particularly if one is looking to identify specific opportunities.

It is possible to make a bad investment in a strong sector if the company is poorly positioned to benefit from the environment. Equally, a good company can outperform its peers as the sector, country, or region overall struggles.

Being flexible means being proactive. This requires more effort than a passive approach, but in a time of high uncertainty, the return more than justifies the cost. We’d be happy to discuss what this means for your portfolio in a 1:1 meeting. Please get in touch if you would like to know more.

The Road Ahead: Insights from global investing experts

The so-called ‘jumbo’ cut was pitched at the time as a ‘recalibration’, rather than as a sign that rates would continue to descend at a similar speed.

Despite the Fed’s bold move, the minutes of the last meeting reveal that the decision was somewhat controversial.

 It was the first instance of a committee member (Michelle Bowman) dissenting from the final decision in nearly two decades.

The ‘median’ of all the members’ views implied a further 50 basis points of cuts by the end of this year, and a further 100 basis points by end-2025.

 The projections imply an expectation that GDP will continue to grow, albeit at a slow pace, that employment will dip then recover, and that inflation will continue to decline.

The determining factor in the decision to ease monetary policy after so long a period of restrictive rates was the perceived deterioration in the U.S. labor market, as indicated chiefly by the slowly rising unemployment rate.

Since then, economic data has been surprisingly positive. A ‘blowout’ jobs report for September showed hiring is still robust, and the unemployment rate has meanwhile fallen to 4.1%.

 In addition, retail sales, income, and savings growth all point in the direction of a resilient economy.

The latest CPI inflation figures also raised eyebrows. Core CPI rose for the first time in a year and a half, while Headline CPI rose faster than expected.

It’s clear therefore that inflation is not in freefall, with certain areas of the economy proving less responsive than others.

With a broader lens, however, the general path of inflation has been downwards for some time. This is true of the most important inflation indicator - Core PCE - which is expected to show a smaller increase than CPI.

In lieu of the so-called ‘soft-landing’, the phrase ‘no-landing’ has recently come into usage to describe a seamless return to normalcy, which now, counter to expectations, appears to be materializing.

Given that the Fed is in range of its 2% target for inflation, it has in one sense achieved its goal. It is now focused on how to maintain, rather than fix, the situation.

After the last meeting, there was an expectation in some quarters that the November meeting would see a further 50 basis points cut.

The bullish economic announcements, in particular the jobs report, coupled with the surprise inflation data, triggered a temporary wobble in sentiment, with some market participants doubting if the Fed would cut rates at the next meeting at all.

This passed relatively quickly, however, and as of the time of writing, views have recalibrated. The consensus is now a 25 basis points reduction in rates on November 8th,

 barring any further shocks, such as a surprise PCE reading, this is likely.

Fed Governor Raphael Bostic, when interviewed in early October

, expressed the view that individual Fed meeting decisions are ultimately of little significance compared to the larger question - where should the ‘natural rate’ (the rate at which the economy is neither expanding nor contracting) be?

In other words, where are the interest rate decisions ultimately heading?

For Bostic, this natural rate is somewhere between 3% and 3.5%, as we can see from the latest ‘dot plot’, opinions among his colleagues differ.

The U.S. election is likely to have a strong impact on the answer to this question. Both Harris and Trump have committed to substantial tax cuts and spending programs. As this will require additional government borrowing, it may be necessary to maintain relatively high interest rates to attract investors to government bonds.

Following Bostic’s advice, we think it’s wise to focus on the wood and less on the individual trees.

Permission to Land? Fed Decision November

 Financial planning starts with defining clear financial goals, whether it's preserving wealth, planning for retirement, or securing a financial legacy for future generations. It's essential to create a roadmap for achieving these goals through financial strategies tailored to short, medium, or long-term objectives.

 Understanding your personal risk tolerance is fundamental to investment planning. Investors need to consider how much risk they are willing to take to achieve higher returns. Conservative investors may prefer low-risk strategies that focus on capital preservation, while others may pursue higher-risk opportunities for higher returns.

 Women often take a thoughtful, long-term approach to investing. Rather than focusing solely on profits, they tend to prioritize financial security and family needs. This emotional consideration often leads to more stable and beneficial long-term investments, as proven by studies on women's investment behavior.

 Diversifying your portfolio across different asset classes minimizes risks and maximizes returns. It’s important not to put all assets in one basket and spread investments instead across sectors and assets.

5. Advantages of Private Market Investments:

 Private markets offer significant opportunities for portfolio diversification and wealth growth. These markets are less accessible and less volatile than public markets. The Family Office, for instance, provides tailored investment solutions in private equity, private credit, and real estate to help investors achieve their financial goals.

6. Compounding Growth for Long-Term Gains:

 Compounding is a powerful tool in financial planning. By reinvesting returns, investors can exponentially grow their wealth over time. This strategy works well in long-term planning, allowing investors to see incremental returns turn into significant growth.

 The Family Office emphasizes the importance of expert advice in navigating financial markets. Relationship managers and financial advisors work closely with clients to customize investment strategies based on their risk tolerance, goals, and preferences. Access to global markets through trusted advisors makes financial planning more efficient and goal oriented.

 Modern technology, including investment apps and platforms, has made investing more accessible than ever. Tools such as The Family Office's digital platform provide seamless, transparent access to global investments, enabling investors to monitor and manage their portfolios from anywhere.

 It is never too late to start investing. The earlier you begin, the better you position yourself for long-term financial success. Whether you have a small or large amount to invest, the key is to take the first step and seek expert advice.

The Rise of Private Debt: A New Era for Capital Markets and Portfolios

Wednesday, November 8, 2023

4:00 pm (GMT+3)

Language: English

Shahab Rashid discusses the rise of private debt, marking a new era for capital markets and portfolios, including:

Speaker

Shahab Rashid

Moderator

Naji Nehme, CFA

Register Now

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