Insights & Commentary

Real GDP Declines in Back-to-Back Quarters, Fixed Income Rallies Sharply

Rates Fall Across Curve, Strong State Credits – Case in Point: Florida

In a quarter marked by global disruption and tightening from central banks, equity markets suffered. Chautauqua’s portfolios performed in line with their benchmarks.

Higher Rate Trend Continues in Q2, Municipal Curve Steepens

Upside Inflation Surprise Emboldens Hawkish Fed, Odds of Recession Rise

Investment Grade Bond Prices Rise as Fed Tightening Cools Economic Data

Mid-Month Pivot in Municipal Yields and Industry Fund Flows

Higher yields a bright spot for bond investors

Bond Yields Climb as a More Hawkish Fed Signals Steepest Hiking Cycle Since Mid-1990s

Inflation and Outflows Cause Parallel Shift Higher in Municipal Curve

Fed Rate Hikes Officially Begin, Treasury Yields Surge in March Capping a Difficult Quarter

Sharp Rate Rise, Curve Flattening Significantly Improves Tax-exempt Income and Valuations

In a quarter that presented many challenges for global equity markets, and where growth stocks significantly lagged value, Chautauqua's funds underperformed their benchmarks.

Worldwide investing offers an expanded opportunity set.

Russian Invasion of Ukraine Moves Markets, Credit Spreads Wider in February, Returns Negative

Rates Rise and Curve Flattens on Fed and Geopolitical Uncertainty, Municipal Credit Strength Limits Spread Widening, Negative Returns in February on Rising Rates; Lower-Quality Underperforms

After years of consistent outperformance, Growth stocks have lagged Value stocks since November 2020. Will this rotation to Value represents a secular change in market leadership?

Fed Articulates Faster Path of Policy Tightening to Fight Inflation; Yields Climb Sharply, Credit Spreads Widen; Agency RMBS Model Changes, January Returns Negative Across the Board

Liquidity Fades on Selling Pressure Driving Municipal Yields Sharply Higher, Puerto Rico Exits Bankruptcy, Sharply Negative Returns to Start 2022

The portfolio had one of the strongest quarters in its history versus its benchmark, the Russell 2500 Growth Index. Stock picking was the key driver of outperformance.

The portfolio outpaced its benchmark, the Russell MidCap® Growth Index, in the fourth quarter. More profitable companies outperformed again, particularly within computer services and software.

Baird Advisors sees a more complex and challenging municipal market environment ahead that will require a multi-faceted strategy—more like chess than checkers—to successfully navigate.

An unpredictable fourth quarter drove extreme gains and losses in stocks. Chautauqua's funds underperformed their benchmarks; though in an exceptionally volatile 2021 calendar year, they appreciated in value.

Key Municipal Events of 2021, Solid Q4 Adds to Strong Municipal Returns in 2021, 2022 Outlook and Opportunities

Pandemic Persists Yet Yields and Inflation Rise on Strong Growth in 2021, Fed Policy Pivot Driven by Labor and Supply Chain, 2022 Outlook

Treasury Curve Flattening Continues, Omicron Concerns Surface, Volatility Returns

Stable Short Rates, Falling Long-Term Yields Leads to Flatter Curve, The Infrastructure Bill (IIJA) Passes Includes $550B of New Spending

Municipal Yields Rise, Muni Provisions Out of “Build Back Better” Plan, Weakest Cities/States Show Fiscal Improvement; Puerto Rico Prepares to Exit Bankruptcy, Upward Rate Movements Push October Returns Negative

Expectations for Fed Policy Shift, Treasury Curve Flattens, Planned Fiscal Programs Downsized, Credit Wider, Mortgages Tighter in October; Both Tighter YTD, Agg Returns Modestly Negative in October; YTD Remains Negative

The Baird Mid Cap Growth portfolios rose 4.7% in the third quarter, gross of fees, despite a slowing economic recovery and trouble in the global supply chain. The Russell MidCap® Growth Index, declined.

The Baird Small/Mid Cap Growth strategy gained 1.4% in the third quarter, gross of fees, defeating headwinds, like problems in the global supply chain, that drove the Russell 2500 Growth Index to a loss of 3.5%.

As the market moves from low-quality to high-quality stocks, the Baird Value strategies relied on security selection to outpace its benchmarks.

Yield Curve Flattens as Yields Rise, Potential Turmoil at the Fed, Increased Volatility Impacts Economic Recovery, Spreads Mostly Widen During Q3; Tighter YTD, Market Returns Negative in Sept; Mixed QTD and YTD

Municipal Yields Rise and Curve Steepens in Q3, Key Municipal Revisions Included in Biden’s Infrastructure Draft, Shorter and Lower-Quality Led Performance in Q3

Global markets were mixed this quarter; Chautauqua’s funds were well positioned and outperformed their benchmarks.

Yields Rise Modestly as Fed Confirms Tapering Likely to Begin in 2021; Spreads Relatively Unchanged in August; Market Returns Generally Negative in August, Mixed YTD

Municipal Yields Rise and Curve Steepens, Municipal Credit Ratings Improving Despite Evident Natural Disaster Risks, Lower-Quality Outperformance Stalls and Long-Term Maturities Lag.

Yield continue to fall and curve flattens as Fed signals status quo; Delta variant increases COVID-19 cases.

Trend of lower rates and flatter curve continues in July.

With supply chains struggling to meet demand, growth stocks continued their volatile ride higher. For the strategy, healthcare stocks continued to lead our outperformance.

With supply chains struggling to meet demand, growth stocks continued their volatile ride higher. Increased business and consumer spending helped fuel a strong quarter.

As we move from economic recovery to expansion, high-quality stocks continue to hold their own. But a handful of so-called “meme” stocks continue to confound the benchmark.

Nearly all sectors and regions performed strongly in the second quarter, with the U.S. continuing to lead relative to international developed and emerging markets.

Curve flattens on both record demand and supply, fiscal support and record tax revenues lead an impressive recovery for municipal credit.

Yield curve flattens as Fed signals tapering and liftoff may begin earlier than previously anticipated.

Rates decline modestly despite inflation concerns; demand outpaces supply as economy reopening continues, spreads tighter across most market segments in May and sector returns mostly positive, but mixed YTD.

Light supply and positive demand support prices, infrastructure negotiations continue, state/local aid distributions begin to enhance recovery and lower quality municipals continue their trend of outperformance.

Baird Advisors provides timely insights about the current interest rate environment for the baby boom generation.

Municipal curve flattens as demand overwhelms even rising levels of supply, municipal investors digest tax and infrastructure plan implications and longer maturities and lower-quality outperformed in April.

Rates decline and curve flattens as Fed maintains extremely accommodative policies, spreads tighter across most market segments in April and sector returns positive for April, but mixed YTD.

Robinhood trading and short squeezes commanded headlines early in the quarter, but progress on the vaccine front, a lower turn in Covid-19 cases, and the passage of a very large fiscal stimulus bill also impacted markets.

The coronavirus vaccine rollout began worldwide giving line of sight to the economic reopening and recovery.

Consistent with past economic and market cycles, low quality/high beta stocks led out of the bear market of 2020.

Rates rise quickly as fiscal stimulus and vaccine rollout lead to higher growth and inflation expectations.

Municipal curve steepens on growth/inflation concerns, ARPA, AJP, AFP and taxes and solid March returns provide mixed returns for the quarter.

Municipals yield rise on inflation concerns, winter storm Uri cripples Texas at great economic impact and rising rates produce negative February returns.

Longer yields rise as curve steepens, COVID-19 cases plateau, House passes pandemic relief package.

Curve steepens modestly, Biden sworn in as U.S. President, vaccination efforts continue, spreads mixed across market segments in January and sector returns mixed though indices generally negative.

Strong rally in lower-rated municipals, Democrats take control in Washington DC, and vaccinations and reopening become visible.

Historically, deep value/low quality stocks have led out of bear markets.

The storyline remained the same for much of 2020’s final three months – difficult trends in COVID-19 cases and deaths, a heated political environment, and an accommodative fiscal and monetary backdrop.

Stimulus measures throughout the year have helped valuation multiples grow richer, despite a collapse in corporate earnings and economic fundamentals.

Stock prices continued their remarkable ascent from the March pandemic low, shaking off a rise in new COVID-19 cases and a heated political environment to finish the third quarter near all-time highs.

As we pass the six-month mark since the U.S. COVID-19 lockdowns, we reflect upon recent and potential long-term changes in consumer spending trends.

Markets grinded higher in the third quarter. Strength was broad-based amongst sectors and geographic regions. In this environment, growth stocks outperformed substantially relative to value stocks.

Baird Funds Senior Portfolio Managers Duane McAllister, CFA, and Lyle Fitterer, CFA, provide insight into how staying with municipals can provide resiliency through uncertainty.

Baird Advisors Managing Director and Chief Investment Officer Mary Ellen Stanek, CFA, and Dan Clifton, partner and head of policy research at Strategas, discuss potential implications of the upcoming election and its impact to the financial markets.

As stay-at-home restrictions eased across the country during the second quarter and consumers and businesses started to resume normal activities, equity prices quickly began discounting a recovery.

Markets rallied vigorously in the second quarter. The increase in risk sentiment was considerable. Positive stock performance was broad-based, with all sectors and regions benefitting.

In our latest whitepaper our investment team provides insights into why it’s important to maintain a high-quality bias in the municipal market until the outlook is more certain.

Much will be written about the first quarter of 2020, which was unprecedented in most every way.

At the time of this writing, most of the nation is locked down with shelter-at-home orders as we approach in the coming weeks what we hope to be the peak of the COVID-19 outbreak in the United States.

This was an extraordinarily challenging quarter for all market participants. In this letter, we discuss the nature of our performance and provide our investment outlook.

Read more about the current opportunities in Taxable Municipal Bonds in Baird Advisor's latest whitepaper.

Baird’s fixed income team illustrates how the moderate tax rate investors can benefit by investing in both the taxable and tax-exempt markets in their fixed income allocations.