| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | - | - |
Marcuard Heritage identifies a structural shift to a higher-nominal world driven by persistent fiscal deficits, rising protectionism, and competitive currency devaluations that elevate inflation and interest rates. While global growth expectations improved modestly with the IMF raising forecasts to 3.0% for 2025, regional divergence persists with US growth stabilizing around 1.7% and European momentum remaining weak. The firm emphasizes capital preservation with opportunistic positioning, viewing rising volatility and market dispersion as catalysts for active management alpha generation. Credit investments remain preferred, particularly loans and non-cyclical short-term high-yield bonds offering 7-9% yields, as corporate default rates are expected to remain moderate at 2-3%. Despite elevated S&P 500 valuations around 23x earnings, the firm maintains a constructive equity stance favoring an absolute return strategy over relative value approaches. Key risks include persistent inflation pressures, US policy uncertainty, and European stagnation, while catalysts include expected Fed rate cuts and potential geopolitical de-escalation supporting non-US assets.
A higher-nominal world has emerged with structurally elevated inflation and interest rates, creating opportunities in credit markets while maintaining constructive equity positioning despite elevated valuations and policy uncertainty.
With a severe recession unlikely, the positive bias on risky assets persists despite increased volatility and potential conflicts under the Trump administration. The global economy remains in a muddle-through phase with trade frictions and policy uncertainty restraining momentum yet not derailing growth. Markets are poised to remain constructive though elevated valuations suggest episodic volatility.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 23 2026 | 2025 Q4 | - | China, credit, equities, Europe, inflation, rates, Trade Policy | - | A higher-nominal world has emerged driven by persistent fiscal deficits, rising protectionism and competitive currency devaluations that structurally elevate inflation and interest rates. Core inflation remains above target in the US, complicating the Fed's path forward, while Europe faces inflation worries returning above 2%. Global trade contention and tariff shocks define the current environment. US tariffs impact European growth projections, while the EU-US statement codifying a 15% tariff rate creates higher effective taxes on transatlantic trade. Protectionism contributes to structural inflation pressures. Credit investments, particularly loans and non-cyclical short-term high-yield bonds offering 7-9% yields, remain preferred. Corporate default rates are expected to average 2-3% with no major spike anticipated. Credit spreads are tight to fairly valued but offer attractive absolute yields. AI tailwinds support equity markets, particularly benefiting technology sectors. Chinese AI and industrial upgrading themes continue to draw capital inflows despite broader economic challenges in the region. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
AIAI has been integrated into RGA's research process through tools like NotebookLM, Gems in Gemini, and Claude Code. The firm views AI as a force multiplier for human judgment rather than a replacement, emphasizing the Kasparov Law principle. They believe the market narrative around AI displacement is swinging to unhelpful extremes, creating investment opportunities. |
Machine Learning Automation Software Productivity Innovation |
CreditFund focuses on elevated carry in high yield credit markets with spreads remaining range bound below 300 basis points. Manager believes high yield credit is fundamentally strong but valuations are tight, particularly in higher quality BBs. Strategy emphasizes sourcing positions with higher income levels given limited price appreciation opportunities. |
High Yield Credit Spreads Carry Investment Grade | |
InflationInflation has continued to be a persistent feature in Japan and has prompted changes in both corporate and consumer behavior. Importantly, inflation has fed through to corporate earnings and equity performance. Companies that have successfully passed on higher costs to consumers have benefited from improved operating margins. |
Inflation Corporate Earnings Operating Margins Consumer Behavior Cost Pass-through | |
Trade PolicyRecent tariff policies continued to negatively impact U.S. consumers and companies throughout the year. However, international companies have been finding new trade arrangements and growth opportunities, benefiting from shifts in global trade patterns as the new U.S. administration alters terms of international cooperation. |
Tariffs International Growth Cooperation Impact |
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