Alex Strekel joined Clearwater in 2015 and leads a team of business development professionals who specialize is solving operational, accounting, and reporting challenges for asset managers. Alex and his team focus on the key trends impacting the markets and help managers find custom solutions that address both market- and firm-specific needs to provide scale, accelerated growth, and improved margins.
Alex has more than 15 years of experience in financial services, allowing him to consult with all aspects of asset management operations. His career began in market data with Thomson Financial, transitioning to operations and trading with Fidelity; prior to Clearwater, he managed fixed-income portfolios at a Connecticut-based asset manager.
Alex is a graduate of Bates College in Lewiston, Maine and lifelong Connecticut resident. He currently resides in Old Lyme, Connecticut with his wife, son, and daughter, along with their two cats. When not working, you can find him spending time with his young family, keeping active, or attempting his latest “home improvement” project.
As we near the end of 2022, a well-known quote comes to mind: “the only certainty is uncertainty.” In the face of these uncertain times, asset managers are keeping a wary eye on world events to help inform their decisions.
There is no way to be certain about the future of the economy, but there are a few factors that every asset manager should keep in mind. Here are five trends for investors to watch in the coming months.
1. The Fed Aggressively Targets Inflation
The Federal Reserve recently raised the target interest rate by another 75 basis points, to 3.0% to 3.25%. They are expected to continue aggressively raising rates to combat inflation, which was most recently reported at 8.3% in August.
Inflation is a pain we have all felt, from the grocery store to the gas pump. The sharp rise in consumer prices has drawn comparisons to the 70s, when inflation rose as high as 13.3% in 1979 and was followed by a sharp recession in the early 80s.
There are indeed some eerie similarities to the 70s and 80s, to the point where financial analysts at Deloitte have predicted a 15% chance of a “Back to the ‘70s” scenario. We all would like to see inflation decrease, but we are also aware that the Fed’s actions could expedite a cooling market and other economic difficulties.
2. Concerns About a Recession Remain High
During this inflationary period, concerns about a potential recession remain high. In fact, Google searches for “recession” have risen to record levels in the past few months.
The Fed’s recent economic analysis did little to quell these fears, with their projections showing unemployment increasing to 4.4% over the next year. Look for more hesitancy in consumer spending as unemployment rises and the economy cools off.
Additionally, a recent poll found 90% of asset managers are concerned about a prolonged recession. The high potential for a recession is another area that draws comparisons to the economy of the 70s and 80s, though forecasters find it unlikely that unemployment will reach the double-digit peaks seen in the recession in the early 80s.
3. The War in Ukraine Disrupts Food and Fuel Supplies
Winter is quickly approaching, and barring an unforeseen event, the war in Ukraine shows no signs of stopping. Grain and gas supply lines have been disrupted, which could cause severe global consequences.
Disparities in the global food and fuel supply will paint sharp divisions between the “haves” and the “have-nots” in Europe and the rest of the world. High energy prices, fuel shortages, and a missing link to Ukraine and Russia’s grain supplies could lead to a harsh winter around the world.
Global leaders will face tough decisions as they balance the needs of their people with their diplomatic and political obligations. We may see a continuing rise in isolationism as countries hunker down and prioritize their own interests.
4. Homeowners in China Boycott Mortgages
A new disruption has struck the housing market in China in recent months. Amid an ongoing housing crisis, it is estimated around 2% of outstanding mortgages are being boycotted.
It is worth keeping an eye on how this crisis develops as China’s government considers its next actions. It is clear the mortgage industry is facing severe challenges in the coming months.
The full ramifications of the mortgage boycott remain to be seen. However, given the size and scope of China’s housing market, there will clearly be a wide range of net effects to follow.
5. Asset Managers Adopt New Technology to Navigate Uncertain Markets
With so much change and volatility, it is imperative to have systems in place to adapt in a timely and efficient manner. Asset managers are increasingly turning to Software as a Service (SaaS) investment accounting systems to gain access to the up-to-date, accurate data they need to succeed in the modern marketplace, including daily reports on performance, risk, compliance, and more.
Modern investment accounting software makes accounting processes faster and more efficient. Instant access to accurate, timely data gives asset managers a huge advantage to boost their performance each day.
While it may be intimidating to make a finance transformation, the long-term benefits are far too valuable to pass up. It is becoming increasingly important to modernize investment practices to keep up in the increasingly fast-paced and complex investment market.
Clearwater Analytics is a leading SaaS investment accounting service that reports on more than 6.4 trillion in assets for clients including insurers, asset managers, corporations, pension plans, governments, and nonprofit organizations. Schedule a demo today to learn how Clearwater Analytics can help you and your organization drive better results through state-of-the-art investment accounting software.