Current Outlook: A Rocky Year-to-Date
While 2021 brought us record economic growth, storm clouds were already beginning to brew by the end of the year. It was clear that record GDP growth rates risked slowing as stimulus money from the COVID-19 crisis began to dissipate. Fiscal policy was becoming difficult to sustain, suggesting it was reaching its limits, and monetary policy began tightening. In fact, the beginning of 2022 has been a perfect storm of decades-high inflation, rising interest rates, geopolitical instability-turned-war, not to mention the persistence of the COVID-19 pandemic. These factors combined to generate extreme market volatility that persisted through much of the first quarter.
In our view, the combination and persistence of these factors means that investments reliant on beta are likely to continue to be very challenged. We therefore believe investors will need to seek alpha to drive returns and investing in alternatives can be a key source of such alpha. In the following, we highlight five areas within alternatives that we believe represent pockets of opportunity for alpha generation.