KKR Releases Mid-Year Macro Outlook Report Back to Press Releases

KKR Releases Mid-Year Macro Outlook Report

June 20, 2019

Henry McVey Believes Investors Should “Stick to the Plan” in a Volatile Market

NEW YORK–(BUSINESS WIRE)– KKR today announced the release of its 2019 mid-year outlook piece by Henry McVey, Head of Global Macro and Asset Allocation (GMAA). In Stick to the Plan, McVey discusses the current investing environment, including the recent spike in geopolitical concerns. Despite these headwinds, he and his team continue to see an attractive path forward for investors who “stick to the plan” by continuing to invest heavily behind macro themes.

“With all the geopolitical ‘noise’ swirling around these days, there is a growing propensity in the investment community to react quickly to near-term news flows, or even head to the sidelines until there is greater visibility. Our view: stick to the plan,” Henry McVey says.

In his latest report, McVey emphasizes that while overall portfolio risks are higher these days, low-rates, de-levered financial institutions and accommodative central banks should help to prevent a 2007-type downturn. Therefore, he advocates:

  • Owning more cash-flowing assets linked to nominal GDP;
  • Favoring more Opportunistic Credit and Special Situations strategies that have the flexibility to lean into dislocations;
  • Embracing complexity through a variety of investment disciplines, including Energy, Private Equity, Real Estate and Infrastructure; and
  • Remaining overweight the short-end of the interest rate curve, as he sees more room for yield compression.

McVey and his team outline the following key themes influencing their thinking for the second half of 2019 and beyond:


Remain bullish on deconglomeratization, or carve-outs. Complexity associated with large corporate multinationals divesting non-core subsidiaries is substantial, but carve-outs often have the potential to unlock significant value, particularly as it relates to cash flow generation.




The ‘Yearn for Yield’ underscores the structural reinvestment risk that has emerged for income-oriented investors. Own more cash-flowing assets linked to nominal GDP, build more flexibility across mandates, and shorten duration where appropriate.




Lean into periodic dislocations and growing dispersions. The capital markets are increasingly giving investors multiple opportunities to lean into dislocation to buy mispriced assets. The recent increase in dispersions should be an additional tailwind to this theme.




Own secular growth stories that are ‘Cash Flow Compounders’ amidst slowing nominal GDP. With China’s nominal GDP falling, overall nominal GDP growth has suffered mightily. In this environment we think that more investors will migrate towards secular growth stories where there is a meaningful potential for cash flow to compound.

The report also details the GMAA team’s updated asset allocation positions, as well as their key calls for the remainder of the year, including: the potential for the Fed cutting rates twice, a more conservative multiple for the S&P 500 relative to current real rate environment, and a greater than 50% chance that President Trump imposes the next $325 billion in tariffs on China.

Links to access this report as well as an archive of Henry McVey’s previous publications follow:

About Henry McVey

Henry H. McVey joined KKR in 2011 and is Head of the Global Macro and Asset Allocation team. Mr. McVey also serves as Chief Investment Officer for the Firm’s Balance Sheet and oversees Firmwide Market Risk at KKR. As part of these roles, he sits on the Firm’s Investment Management & Distribution 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 manages multiple alternative asset classes, including private equity, energy, infrastructure, real estate and credit, with strategic partners that manage hedge funds. KKR aims to generate attractive investment returns for its fund investors by following a patient and disciplined investment approach, employing world-class people, and driving growth and value creation with KKR portfolio companies. KKR invests its own capital alongside the capital it manages for fund investors and provides financing solutions and investment opportunities through its capital markets business. References to KKR’s investments may include the activities of its sponsored funds. For additional information about KKR & Co. Inc. (NYSE: KKR), please visit KKR’s website at www.kkr.com and on Twitter @KKR_Co.

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 offers or invests. Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be relied on in making an investment or other decision. This release is prepared solely for information purposes and should not be viewed as a current or past recommendation or a solicitation of an offer to buy or sell any securities or to adopt any investment strategy. This release contains projections or other 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.

Kristi Huller or Cara Major

Source: KKR

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