Active Insights

Research-driven insights on global markets from Putnam's Capital Market Strategies team.

Chris Galipeau
Senior Market Strategist

Rick Polsinello, Jr., CIMA®
Senior Market Strategist

Taylor Topousis, CFA
Market Strategist

Highlights of the 2023 Investment Framework

Our Investment Framework contains the views and opinions of Putnam's Equity, Fixed Income, and Global Asset Allocation teams.

Equities


S&P 500

2023 target

4,500


Earnings:
  • At the individual stock level, significant multiple contraction has taken place
  • We expect earnings estimates to be reduced modestly going forward

Sectors favored:

Consumer discretionary, Energy, Financials, Health care, and Technology


Trends:
  • U.S. core inflation and economic growth rates continue to moderate
  • We expect a mild U.S. recession in H2 2024 as the chance for a "soft landing" increases
  • We believe that growth stocks will generate alpha relative to value and view the recent consolidation as an opportunity to add exposure
  • We expect large-cap stocks will outperform small-cap stocks

Investment case for small caps

See how the economic cycle, Fed policy, and valuations affect the current opportunity in small-cap stocks.

Investment case for small caps

Fixed Income


10-year Treasury yield year-end forecast

4.60%

Interest rates:

  • We believe the Fed is at or near the end of its hiking cycle and will end the year in the range of 5.25%– 5.50%, or the Fed could make one more rate hike at its mid-December meeting

Corporate credit:

  • Fundamentals and technicals challenged by slowing growth, high inflation, bank stresses, geopolitical impact on energy supplies, and central bank tightening
  • IG and HY spreads will be affected by macro forces
  • Valuations are somewhat attractive and yields are robust

Mortgage credit:

  • Real estate continues to be challenged by office demand and rising costs of capital, however, we believe much of the risk has already been priced into the market
  • We are finding pockets of value in commercial mortgages, where property prices vary meaningfully by property type and geography
  • Within residential credit, we believe 2023 home prices will remain flat for the year

Emerging market debt:

  • We have a cautious intermediate outlook for EM debt. Sovereign debt appears to be overvalued across the quality spectrum
  • We see the risks of recession and inflation declining, which could be supportive of the sector over the near-term

Prepayment:

  • We believe many prepayment-sensitive assets offer an attractive risk-adjusted return at current price levels and significant upside potential if rates stabilize and volatility declines
  • We expect prepayment speeds to be stable given elevated mortgage rates and softening home prices

Municipal bonds:

  • A high-quality diversifying investment option
  • Fundamentals remain stable
  • Valuations look attractive among certain sectors

Risks to monitor


  • Rate of inflation moderation
  • Slower economic growth amid higher interest rates
  • Magnitude of earnings degradation

Inflation


Forecast for 2023 core PCE

3.25%

Economy


Real GDP forecast for 2023

United States

1% to 2%

Europe

–1% to 0%

Emerging markets

3% to 4%

Opportunities


  • Stocks of U.S. large-cap, high-quality companies with a growth bias
  • Emerging market equities
  • Municipal bonds and selective pockets of the corporate and mortgage credit markets
Top year-end planning considerations

November 9, 2023

Top year-end planning considerations

Bill Cass, CFP®, CPWA®, Director Wealth Management Programs at Putnam
Chris Hennessey, Lawyer and CPA, Putnam Business Advisory Group

Investment insights: Addressing the questions your clients are asking

June 22, 2023

Investment insights: Addressing the questions your clients are asking

Chris Galipeau, Senior Market Strategist
Jason Vaillancourt, CFA, Global Macro Strategist

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Slowing economic growth and fixed income performance

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As a follow up to the piece we published in July that focused on decelerating economic growth and equity returns, we thought it made sense to look at how some fixed income sectors fared during the same periods. We researched this concept to better understand the historical relationship between an economic slowdown, credit spreads, and total returns.

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Consumer sentiment and forward market performance

Consumer sentiment and forward market performance

In light of decades-high inflation, the Federal Reserve tightening monetary policy, and concerns about an economic slowdown, U.S. consumer sentiment has plummeted.. This year, sentiment is historically low, according to the University of Michigan Survey of Consumers.

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Style and factor performance during economic deceleration

Style and factor performance during economic deceleration

Investors are concerned about decelerating economic growth and what this could mean for future equity returns. We researched this question to understand the historical relationship between an economic slowdown, earnings degradation, and any subsequent style or factor performance.

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Yield curve inversion and market performance

Yield curve inversion and market performance

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Market performance during Fed tightening cycles

Market performance during Fed tightening cycles

In this analysis we assess asset class performance during prior cycles of Federal Reserve monetary tightening.

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A look at the Federal Reserve’s 2014 taper

A look at the Federal Reserve’s 2014 taper

With the Federal Reserve nearing a decision to begin tapering its asset purchases, we thought it would be beneficial to look at what occurred the last time the Fed reduced its asset purchases.

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Post-recession market trends

Post-recession market trends

How do different asset classes perform coming out of recession? Is there a drop off in performance in the second year of a recovery relative to the first year? In this analysis we look at asset class performance in the two calendar years after a recession ends.

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A season for stock returns

A season for stock returns

Is there seasonality to equity market returns over time and, if so, is it repeatable, measurable, and significant? We turned to one of our favorite sources for market information, “The Stock Trader’s Almanac” to find the answers.

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Tracking PMI data and forward equity returns

Tracking PMI data and forward equity returns

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What do yields reveal about inflation expectations?

What do yields reveal about inflation expectations?

Investors can monitor these relationships to understand the underlying drivers of nominal yields.

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Growth, Value, and Recessions

Growth, Value, and Recessions

What equity investment style performs best as the economy enters a recession?

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A look at inflation and investment performance

A look at inflation and investment performance

Investors are concerned about rising inflation going forward. We researched recent history to better understand how different asset classes perform during periods of increasing core inflation as measured by the Personal Consumption Expenditure Core Price Index.

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The January Barometer

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U.S. dollar and trends in emerging markets

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Economic expansions and equity returns

Economic expansions and equity returns

What can history tell us about the length of economic expansions and recessions? And further, what can investors expect from the stock market during economic expansions?

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Trends in small - and large-cap stocks during recessions

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Studying market history may help provide a useful framework for investors as we navigate the recession of 2020. We looked back at the 5 recessions since 1980 as a guide.

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Growth, Value, and Recessions

Growth, Value, and Recessions

What style performs best as the economy enters a recession? What style performs best as the economy exits a recession?

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S&P 500 Return Attribution

S&P 500 Return Attribution

How have a handful of stocks impacted the year to date return of the S&P 500 index?

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Chris Galipeau

Chris Galipeau

Chris is the Team Leader of the Capital Market Strategies team, communicating Putnam's active investment views to help them have a positive impact on client portfolios. He is a member of the CFA Society Boston and the Market Technicians Association, and holds Series 7 and 63 licenses with FINRA. Chris joined Putnam in 2013 and has been in the investment industry since 1992.

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Rick Polsinello, Jr., CIMA

Rick Polsinello, Jr., CIMA®

Rick is a Senior Market Strategist on the Capital Market Strategies team, conducting economic and financial market research and sharing insights with Putnam clients. Previously at Putnam, he was a Senior Investment Director, specializing in fixed income. He holds his Series 7, 24, and 66 licenses with FINRA. Rick joined Putnam in 2013 and has been in the investment industry since 2002.

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Taylor Topousis, CFA

Taylor Topousis, CFA

Taylor is a Market Strategist on the Capital Market Strategies team, communicating Putnam's investment views and opinions to Putnam clients and generating new economic and financial market research for the team. He is a member of the CFA Society Boston and has been in the investment industry since he joined Putnam in 2016.

Follow him on LinkedIn