PSN Top Guns Manager of the Decade 2022 - A Decade Driven by Political Events, a Pandemic and Historical Monetary Policies

Celebrating PSN Top Guns Managers of the Decade

The past decade will be remembered for its overall strong U.S. equity returns (Russell 3000 index +12.13%) as markets distanced themselves from the Great Financial Crisis (GFC). Historically accommodative monetary policies throughout the decade supported record high equity levels. The recovery from the GFC remained strong during the early stages of the decade. Meanwhile, the worst year of the decade was the last year when equities fell into a bear market and bonds experienced their largest drawdown on record as the Federal Reserve (Fed) ended its accomodative policies and started its steepest rate hike cycle in four decades. Sandwiched in between were a multitude of highs and firsts. It included unprecedented government intervention, record low interest rates, and eye-opening political events; all culminating in a risk-on environment as U.S. equities (S&P 500 index +12.56%), U.S. high yield bonds (ICE BofA US High Yield index +3.94%) and international equities (MSCI World Ex. US index +5.11%) posted solid returns during the decade.

The first seven years of the decade will be characterized by slow economic growth and easy money due to historically low borrowing costs as the Fed tried to support the GFC recovery. The decade started off strong, as U.S. equities benefited from a recovering global economy and a risk-on investment environment, while experiencing their best year of the decade in 2013. Developed equity markets (MSCI World index) posted a strong +27.36% return while U.S. equities (S&P 500 index) recorded a stellar +32.39% in 2013. Meanwhile, 2013 will be remembered for the taper tantrum that was set off by the Fed catching bond markets by surprise when hinting that accommodative polices may soon come to an end, which resulted in a -2.02% return for the Bloomberg U.S. Aggregate index.

2016 will be remembered as the year political events defied expectations. The rise of populism lead Britons to vote “yes” to leaving the European Union, while Donald Trump shocked the world by becoming the 45th President of the United States. Yields on Sovereign debt hit all-time lows and, in some cases, hit negative territory. Through all this political turmoil, equity markets remained resilient, as U.S. equities (Russell 3000 index) finished the year up +12.74%, emerging markets (MSCI EM index) posted a +11.60% return, while the MSCI EAFE index posted a modest +1.51% return.

While the Fed started to tighten monetary policies in December 2015, the U.S. economy continued to expand due to fiscal stimulus and a historically strong labor market in 2018, as U.S. equities hit all-time highs in September. Large cap growth (Russell 1000 Growth +17.09%) and small cap growth stocks (Russell 2000 Growth +15.76%) led the rally during the first nine months of 2018. However, the risk-on sentiment quickly changed as investors fretted over the Fed’s rate hiking policy, global growth, geopolitical issues, and trade tensions. The early equity gains quickly turned to losses, as all major global equity indexes finished 2018 in the red, led by the S&P 500 index (-4.38%), MSCI EAFE index (-13.36%) and MSCI EM index (-14.25%). Due to the quick change in sentiment, investors flocked to safety in fixed income, as short-term Treasuries, measured by the Bloomberg U.S. Government 1 – 3 Yr. index, finished the year up +1.58%.

We cannot discuss the past decade without talking about 2020. A global pandemic that resulted in a global economic shutdown as governments around the globe enacted shelter-in-place measures to try and stop the rapid spread of the COVID-19 virus. These measures resulted in millions of unemployed in the U.S. alone. This short period of time was unprecedented for financial markets as oil (WTI) plummeted to -$37 a barrel, 10-year Treasury yields hit 0.52%, and the S&P 500 index fell a -34% in a matter of weeks. However, strong, and swift actions from the Fed and U.S. Government helped stabilize markets as the S&P 500 index defied expectations to finish the year +18.40%. Technology stocks soared (Russell 1000 Growth index +38.49%) as consumers and businesses turned to technology during the lockdowns.

While the decade started off with a bang, it ended with a whimper. 2022 will be remembered for the beginning of the war in Ukraine and an end to the historically accommodative monetary policies that helped rescue the U.S. economy and financial markets from the global pandemic. Not only did the Fed take away the punch bowl at the party, but it also started its very aggressive tightening policies to try and tame 40-year high inflation that was a result of very accomodative monetary and fiscal policies during the pandemic. The tightening of the purse strings lead to reduced liquidity and an end to excessive exuberance. These tighter policies resulted in equity markets reaching bear market territory and bond markets experiencing their worst year ever. The S&P 500 index posted a -18.11% return while the MCSI EAFE index fared a little better (-14.01%). Meanwhile, bonds provided no haven for investors as the Bloomberg U.S. Aggregate index fell a -13.01% and the perceived safety of Treasuries didn’t help either as the ICE BofA US Treasury index fell a -12.85% during tumultuous year.

Below are the strategies that navigated the past ten years to make the PSN Top Guns of The Decade.

U.S. Large Growth Universe Top Guns of the Decade

• AllianceBernstein L.P.: AB US Large Cap Growth (+15.7% for the decade)
• Night Owl Capital Management, LLC: Night Owl Equity (+15.5% for the decade)
• Fiera Capital Corporation: Large Growth (+15.3% for the decade)

International Equity Universe Top Guns of the Decade

• Pacific Investment Mgmt. Co: StocksPLUS International Hedged (+8.9% for the decade)
• MFS Investment Management: MFS International lntrinsic Value Eq (+8.7% for the decade)
• Comgest Asset Management Intl Ltd.: Global ex-US Equity (+8.4% for the decade)

High Yield Universe Top Guns of the Decade

• MacKay Shields LLC: High Yield (+5.1% for the decade)
• Barings: U.S. High Yield Bonds (+5.0% for the decade)
• BlackRock: High Yield Bond (+4.8% for the decade)

The complete list of PSN Top Guns, and an overview of the methodology, can be located on https://financialintelligence.informa.com/ under the “Products & Services” tab. If you do not have a login, you may register for complimentary access. For more details on the methodology behind the PSN Top Guns Rankings, or to purchase PSN Top Guns Reports, contact Margaret Tobiasen at Margaret.tobiasen@informa.com.

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PSN Top Guns quarterly commentary is presented by Zephyr's Market Strategist Ryan Nauman whose analysis and research has been shared on financial industry media including WealthManagement.com, Reuters, CNBC, Bloomberg, MarketWatch.com, Yahoo! Finance, and the Wall Street Journal, while being a regular guest on TD Ameritrade Network, Yahoo! Finance, Bloomberg TV, Bloomberg Radio and Chuck Jaffe’s Money Life podcast.