Jason Colodne of Colbeck Capital – June Market Rewind

The final week in May involved robust investment activity — and yet another indication the U.S. may be grappling with inflation for the indefinite future, says Jason Colodne, co-founder of Colbeck Capital Management, an NYC-based private equity asset management organization focused on strategic lending.

Economic Snapshot

Last week, the Federal Reserve released the minutes from its early May meeting, revealing continued unease surrounding inflation — and indications the organization is ready to enact more than one 50-basis-point interest rate increase amid financial stability concerns.

The Federal Open Market Committee raised the target for the federal funds rate by half a percentage point at the meeting and stated plans to begin reducing its $9 trillion balance sheet, which contains Treasury- and mortgage-backed securities, in June.

The FOMC also said its policy stance may transition from a neutral state to “a restrictive stance of policy.”

The Conference Board’s most recent Leading Economic Index results, which included a 0.3% decrease to 119.2 in April from March, when the index — which takes factors such as new private housing building permits, weekly initial unemployment claims and stock prices into account — had declined by 0.1%.

Overall, however, the Leading Economic Index has risen 0.9% since October 2021. Ataman Ozyildirim, the Conference Board’s senior director of economic research, attributed the decrease in April to weak consumer expectations and a dip in residential building permits.

Recent Market Activity

Market performance was generally positive in the final week of May, with the Dow Jones Industrial Average and S&P 500 indexes experiencing their best week in more than five months — and all three major indexes finishing the week higher than they began it.

The S&P 500 increased 1.9% on Monday, then dropped 0.8% the next day. On Wednesday, the S&P rose 0.9%; on Thursday, it experienced a roughly 2% bump — and on Friday afternoon, initial closing results showed a 2.5% increase for the day.

The Nasdaq composite index gained 1.6% on the first day of the week, followed by a more than 2% drop. On Wednesday, the index climbed 1.5%, and rose again on Thursday with a 2.7% increase. According to Friday’s initial results, the Nasdaq appeared to have ended the final day of trading this week with a 3.3% gain.

The Dow Jones Industrial Average rose 2% on Monday last week, and on Tuesday grew by 0.2%. The index also rose on Wednesday, zooming upward by 0.6%, and for the fifth consecutive day increased again on Thursday by 1.6%.The Dow continued its winning streak on Friday with a 1.8% gain.

The benchmark 10-year U.S. Treasury yield and 30-year Treasury bond showed a notable drop on Tuesday, with the benchmark 10-year Treasury note declining 10 basis points, reaching 2.756%, and the 30-year Treasury bond yield following suit with a 10-point drop, to 2.966%.

By Friday, the yield on the benchmark 10-year Treasury note was hovering around 2.743%, and the yield on the 30-year Treasury bond declined to 2.972%.

In other investment news, several panelists who spoke at a collateralized loan obligation and leveraged loan conference last week in New York noted that rising rates and the change to the yield curve have impacted the primary leveraged loan market — and have also prompted hesitant CLO issuance, according to credit rating agency KBRA, which sponsored the event.

The conference panelists also theorized a mild recession in the U.S. was possible, but said it might not occur until the middle of next year.

About Jason Colodne

Jason Colodne is the senior transaction partner at Colbeck Capital Management and oversees all aspects of investment execution and portfolio management. Colodne co-founded Colbeck Capital Management as a managing partner in 2009. Colodne’s investment experience spans over two decades.

About Colbeck Capital Management

Colbeck Capital Management (colbeck.com) is a leading, middle-market private credit manager focused on strategic lending. Colbeck partners with companies during periods of transition, providing creative capital solutions. Colbeck sponsors its portfolio companies through consistent engagement with management teams in areas such as finance, capital markets and growth strategies, distinguishing itself from traditional lenders. Founded in 2009 by Jason Colodne and Jason Beckman, the principals have extensive experience investing through different market cycles at leading institutions, including Goldman Sachs and Morgan Stanley.