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435: News of the Week 06/05/24

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Market Updates:

  • Economic data since last week’s update:
    • Core PCE Price Index rose 0.2% in April, in line with expectations
    • Job openings decreased in April, indicating a cooling labor market
  • Equity markets have been a bit volatile recently, down a couple of percentage points
  • Ongoing volatility is expected as we move through the summer and elections
  • However, the economic and inflation backdrop should provide good support for public equity and bond markets
  • Potential for the Fed to start reducing rates in the second half of 2024, which could restart the real estate investment cycle
  • The recommendation is for investors to be deployed and looking for opportunities, rather than sitting on the sidelines

Investment Topic: Private Credit Funds

  • Also known as private debt or direct lending
  • Growth in non-bank lending due to regulatory changes making it harder for banks to expand their balance sheets
  • Private credit funds raise capital from investors and deploy it as loans and other debt instruments
  • Can target different types of credit and debt structures
  • Potential benefits include regular interest payments, 7-12% annualized cash returns, and portfolio diversification
  • Risks include being locked into a long-term investment and fund manager selection being key