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CLA OUTLOOK

Key Insights for Sound Financial Strategies

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APRIL 13 WEEKLY INSIGHTS
Credit markets signal a return to risk on
  • Despite negative headlines about private credit, public credit markets have been resilient with investment grade bonds slightly outperforming the S&P 500 year-to-date.
  • Data shows risk appetite is reaccelerating, with the high yield vs. investment grade credit ratio pushing to new highs this week.
  • The trend has been firmly positive since October, with the only setback coming from a Middle East–driven risk off episode which appears over.
  • Fresh highs reinforce a risk on regime, supporting cyclical assets like equities and favoring carry and beta over capital preservation.
U.S. dollar’s safe haven role tested — and reaffirmed
  • Recent tensions in the Middle East have directly tested the U.S. dollar’s safe haven role, driving clear flight to quality flows into the dollar and U.S. Treasury markets.
  • The dollar strengthened during peak risk off episodes, confirming — despite periodic skepticism — it continues to function as the primary global reserve currency when volatility rises.
  • Despite recent debate, the petrodollar system remains intact, with oil still predominantly priced and settled in U.S. dollars.
  • Overall market behavior reinforces the dollar’s relative advantage, as its liquidity, scale, and lack of true substitutes continue to anchor investor demand during periods of global stress.
Private equity expands the opportunity set within equity allocations
  • Public companies represent only 13% of firms with revenues over $100 million, leaving most of the opportunity in private markets.
  • The number of publicly listed companies has declined by roughly 50%, from 8,090 in 1996 to 4,010 in 2024.
  • Private equity returns are driven by operational improvements, multiple expansion, and capital structure optimization, with the current cycle emphasizing margin improvement.
  • Private equity, like other private asset classes, is increasingly accessible to retail clients through semi-liquid fund structures.
  • CLA recommends carving out a portion of public equity exposure to private equity for clients seeking long-term diversified growth. (Source: Partners Group)

Develop strong financial strategies

Tune in to the CLA Outlook for 2026 as we discuss timely topics around policy, the economy, and market performance.
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Strategic Opportunities

The Big Picture for 2026

The CLA Outlook signals a turning point: stabilized inflation, growth above trend, and easing interest rates. Explore the key forces influencing portfolios in the year ahead.

  • Economic outlook

    Growth is back on the horizon after three years of higher interest rates and restrictive Federal Reserve policies, with AI helping to transform industries.

  • Fiscal policy

    The rising U.S. deficit remains a key concern as government spending continues to outpace revenues — watch for this to be a focal point heading into midterm elections.

  • Fixed income outlook

    Lower interest rates should be a tailwind to bonds in 2026, though consider credit quality and duration when building high-quality income portfolios.

  • Equity outlook

    Despite elevated stock valuations, led by tech-dominant Magnificent-7 stocks, equities remain compelling because of strong earnings growth and a robust economic backdrop.

  • Alternatives outlook

    Lower interest rates favor private equity and private real estate, while private credit can warrant caution. Manager selection and due diligence remain critical.

  • We can help

    No matter your financial position, incorporating sound tax and wealth advisory could help you achieve more.

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