Latest news with #HenryMcVey
Business Times
21-05-2025
- Business
- Business Times
Moody's downgrade of US credit rating challenges portfolio allocations
[SINGAPORE] Moody's downgrade of the US' credit rating by a notch (Aaa to Aa1) shouldn't have come as a big surprise. Earlier downgrades by S&P in 2011 and Fitch in 2023 have raised expectations that Moody's would be next; it was only a question of when. S&P and Fitch's downgrades were prompted by concerns over US fiscal discipline – or the lack of – and the 'political brinksmanship' that took place repeatedly over the debt ceiling which made, as S&P wrote in 2011, America's 'governance and policymaking less stable, less effective, and less predictable than what we previously believed'. Fitch also noted the 'steady deterioration' in governance in fiscal and debt matters over the past 20 years. Today, the macro backdrop differs in many respects from 2011 and 2023. The common thread, however, is the perception of continuing US profligacy at a time when it can ill afford it. While the US economy has remained remarkably resilient, Trump's tariffs have muddied the outlook for business and investment, inflation and consumer spending. The fiscal hole looks set to deepen. Trump is putting pressure on lawmakers to pass a Bill to extend tax cuts; the Bill is projected to raise the Budget deficit by US$3 trillion over the next decade. Moody's noted in a statement that US government debt and interest payment ratios have risen to levels significantly higher than similarly rated sovereigns. It expects federal deficits to approach 9 per cent by 2035, from 6.4 per cent in 2024. 'Even though US Treasury assets remain in demand, debt affordability has deteriorated due to higher yields since 2021… While we recognise the US' significant economic and financial strengths, we believe these no longer fully counterbalance the decline in fiscal metrics,' it said. Treasury yields have since risen, which does not bode well for borrowers. The 10-year Treasury yield this week was at 4.52 per cent and 30-year yield at 5.05 per cent. Until now, foreign investors have been willing to buy and hold US debt, but for how much longer? Portfolios heavily exposed to US Treasuries suffer a double whammy of capital loss as yields rise and the US dollar weakens. Several Asian currencies have appreciated against the US dollar. There is also a knock-on effect on equities, as higher bond yields make equities relatively less attractive. For investors, the macro environment is raising serious questions about the role of traditional assets in portfolios. Henry McVey, KKR partner and head of global macro and asset allocation, believes markets are in the midst of a 'regime change'. In a paper in May, he argued that government bonds no longer serve as 'shock absorbers' in a portfolio. The 'Liberation Day' tariff announcement has ushered in the 'unsettling triumvirate' of US dollar weakening, equities selling off and bond prices falling – at the same time, he wrote. 'There is now an ongoing clear and present danger for global allocators who bought into the idea that when stocks sell off, bonds will always rally. Importantly, this significant breakdown in asset allocation theory is occurring not only in the US but also across most other global developed markets,' he wrote. To be sure, investors should refrain from knee-jerk reactions, but stick to a diversified approach – across assets, geographies and currencies. This isn't easy to implement when many portfolios are overweight US assets and the dollar, and arguably need to rebalance. But inaction could be costly.
Bloomberg
20-05-2025
- Business
- Bloomberg
KKR Says Bonds' Role as Portfolio ‘Shock Absorbers' Is Eroding
Government bonds are no longer working as an effective hedge against risky assets, creating a challenge for global investors and spurring a search for asset diversification, according to KKR & Co. Bigger fiscal deficits and stickier inflation suggest that bonds will not always rally when stocks sell off, breaking down the traditional relationship between the two assets, Henry McVey, KKR's head of global macro and asset allocation, said in a research note.
Yahoo
20-05-2025
- Business
- Yahoo
KKR Releases "The Art of Learning"
New Report Outlines Key Learnings for Asset Allocation Post Liberation Day NEW YORK, May 20, 2025--(BUSINESS WIRE)--KKR, a leading global investment firm, today released "The Art of Learning," a new Insights piece by Henry McVey, CIO of KKR's Balance Sheet and Head of Global Macro and Asset Allocation (GMAA). While Henry McVey and his team continue to believe that we are still in a Regime Change for investing, they explain that the introduction of a potentially weaker dollar, coupled with their longstanding conviction in the correlation between stocks and bonds moving from negative to positive, could have significant implications for asset allocation. They specifically note that the depreciation of the U.S. dollar, sell-off in equities and decline in bond prices seen following the April 2nd Liberation Day announcement have challenged the following two fundamental underpinnings of modern-day asset allocation theory: During risk off days, government bonds are no longer fulfilling their role as the 'shock-absorbers' in a traditional portfolio, upending the theory that when stocks sell off, bonds will always rally both in the U.S. and in other developed markets. While bonds and stocks were selling off together, the U.S. dollar was also weakening, raising a fear that local currency liabilities could be a more severe drag on performance than expected, especially during periods of volatility. In light of these changes, McVey and his team posit that the traditional role of U.S. government bonds in 60/40 portfolio structures may diminish and that investors could benefit from incorporating international bonds to provide diversification benefits. The report also examines the relative importance of goods versus services to the U.S. economy, estimating that the gross profitability of U.S. services exports currently surpasses the 'lost profits' on goods that the U.S. imports instead of manufacturing domestically. This points to the fact that, contrary to the popular interpretation of the 'America First' agenda, U.S. businesses have actually been outsourcing the production of low margin goods to help facilitate activity in relatively more profitable and productive areas. With that in mind, McVey and his team believe that more work needs to be done around extending America's competitive advantage in higher-profitability, higher return services sectors of the economy, and that this would be a boon not only for businesses but also for workers. In addition to these insights, the report discusses how partial tariff relief has arrived faster than originally anticipated. The team has lowered their effective tariff rate from 18% to 15% and revised GDP forecasts in the U.S., Europe, and China accordingly. The report also addresses key questions that the team has been receiving from clients following the Liberation Day announcement, including the outlook for capital markets, particularly outside the United States. Links to access this report in full as well as an archive of Henry McVey's previous publications follow: To read the latest Insights, click here. For an archive of previous publications please visit About Henry McVey Henry H. McVey joined KKR in 2011 and is Head of the Global Macro, Balance Sheet and Risk team. Mr. McVey also serves as Chief Investment Officer for the Firm's Balance Sheet, oversees Firmwide Market Risk at KKR, and co-heads KKR's Strategic Partnership Initiative. As part of these roles, he sits on the Firm's Global Operating Committee and the Risk & Operations Committee. Prior to joining KKR, Mr. McVey was a Managing Director, Lead Portfolio Manager and Head of Global Macro and Asset Allocation at Morgan Stanley Investment Management (MSIM). Learn more about Mr. McVey here. About KKR KKR is a leading global investment firm that offers alternative asset management as well as capital markets and insurance solutions. KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world-class people, and supporting growth in its portfolio companies and communities. KKR sponsors investment funds that invest in private equity, credit and real assets and has strategic partners that manage hedge funds. KKR's insurance subsidiaries offer retirement, life and reinsurance products under the management of Global Atlantic Financial Group. References to KKR's investments may include the activities of its sponsored funds and insurance subsidiaries. For additional information about KKR & Co. Inc. (NYSE: KKR), please visit KKR's website at For additional information about Global Atlantic Financial Group, please visit Global Atlantic Financial Group's website at The views expressed in the report and summarized herein are the personal views of Henry McVey of KKR and do not necessarily reflect the views of KKR or the strategies and products that KKR manages or offers. Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be relied on in making an investment decision or any other decision. This release is prepared solely for information purposes and should not be viewed as a current, past or future recommendation or a solicitation of an offer to buy or sell any securities or to adopt any investment strategy. This release contains forward-looking statements, which are based on beliefs, assumptions and expectations that may change as a result of many possible events or factors. If a change occurs, actual results may vary materially from those expressed in the forward-looking statements. All forward-looking statements speak only as of the date such statements are made, and neither KKR nor Mr. McVey assumes any duty to update such statements except as required by law. View source version on Contacts Media: Julia Kosygina or Lauren McCranie212-750-8300media@ Sign in to access your portfolio
Yahoo
15-04-2025
- Business
- Yahoo
KKR's "White Knight" Strategy in Buying Assets
Henry McVey, KKR's Head of Global Macro and Asset Allocation joined Wall Street Beat on Bloomberg Open Interest to talk about KKR's activism strategy. Sign in to access your portfolio
