Macro Pulse for September 14: Private Markets Outlook – Navigating a Global Market Reset

• The Fed will resume its easing cycle in a “low hire, low fire” economy. The Fed meets next Wednesday and is expected to deliver a 25bp cut on the back of weak hiring data across sectors. Though market consensus has coalesced around 3 cuts between now and year end – implying one cut in each of its remaining meetings – we take a slightly more hawkish stance, viewing September as the start of a sporadic, not sustained, easing cycle, unless the labor market deteriorates more clearly, via accelerated layoffs or weaker wage growth.
• Last week, BLS published its largest ever annual revision of job creation for the 12 months through March 2025, halving the originally believed 1.8 million jobs with a -911,000 payroll revision. While the headline is dismal, it represents heavily backward-looking data that we do not expect to influence Fed decision making going forward.
• Inflation is behaving exactly as expected, reaccelerating across both goods and services as tariff pressures feed into both corporate and consumer input costs. A choppy 6-month monthly reacceleration trend is visible in CPI (+0.4% MOM in August) across all segments except energy.

Our view on the private markets

From diverging interest rate cycles to policy uncertainty, the first half of 2025 shifted the private markets landscape. This month we published our semi-annual private markets outlook. The report explores the macroeconomic conditions shaping private markets and offers our key takeaways for investors on private equity, private credit, real estate, and real assets.

The research is available here:

• On our website
• We also have a summary video outlining key takeaways as well as a discussion of the report in a recent episode of Market Matters

This week, we share the key takeaways from our private markets outlook including the four themes driving the private markets reset as well as our asset class insights.

Key macroeconomic forces impacting private markets

Private markets investors entered 2025 with high expectations, but policy shifts impacted businesses and markets across the globe. In response, private markets are entering a new phase of recalibration and opportunity driven by four key themes:

1. Global rates are moving lower. Rates have eased just enough to support investor confidence and borrower conditions – even in the U.S. where rates are stickier. This leaves capital costs in a sweet spot – low enough to stimulate activity, but high enough to provide strong income generation potential. We recommend investors focus on diversification across both geographies and asset classes to access different stages of rate cutting and credit creation cycles.
2. Policy impacts are materializing and will continue to impact global growth. The global macroeconomic landscape has shifted, as businesses and investors digest the potential impacts of tariffs, inflation risk, and still-sticky policy rates, reshaping business conditions and investor expectations. These changes to economic policy really widen the range of potential outcomes for the economy and markets. As such, selectivity will be increasingly important, and investors should focus on managers with strong track records and sectors that have exhibited historical resilience, such as lower middle market private equity.
3. Private markets will continue to grow and democratize. Institutional allocations to private markets continue to grow as institutional investors seek higher returns and diversifying benefits of private markets. Wealth investors are also becoming a bigger force in private markets. Potentially supportive U.S. policy changes – including the recent executive order on expanding access to alternative assets in 401(k) plans – reinforce our view that the democratization of private assets is accelerating. New sources of capital will contribute to shifting competitive dynamics – as we wrote about in our note from August 24 on expanding access to alternatives in retirement plans - which again leads us to favor selectivity.
4. Global megatrends are creating opportunities for investors. Global megatrends related to supply chain re-globalization, electrification, and digitization are driving a capital-intensive period of activity, creating sector and diversification opportunities. Investors should seek sectors that may benefit from the transition-oriented themes.

Our asset class views

Uncertainty has been a driving force of activity – or a lack of it, in some cases. But investors are settling into the idea that uncertainty may not clear any time soon. As a result, they’re beginning to re-engage with greater discipline. We believe the next year will mark a turning point in private market activity – favoring selectivity, diversification, and transition-oriented exposure. Against this backdrop, we outline our views across private equity, private credit, real estate, and real assets:

Private equity: Despite near-term challenges, we believe private equity remains a core component of a multi-asset portfolio, offering attractive return potential and diversification benefits. With valuations still elevated, we favor segments of the market with greater choice and compelling pricing, particularly the middle market, which has historically outperformed during periods of heightened risk.

Private credit: Private credit continues to be a relative bright spot. Despite macroeconomic uncertainty, we remain optimistic about private credit given its defensive structures and reliance on long-term lender-borrower relationships. Here, too, we favor competitive dynamics in the middle market. In particular, middle market direct lending stands out for its potential to deliver higher returns with lower volatility compared to public credit.

Real estate: Diverging interest rate cycles in the U.S. and Europe are driving regional differences. European valuations have stabilized and are now improving in response to a more consistent (and earlier) interest rate cutting cycle, while U.S. markets, under pressure from higher-for-longer conditions, are seeing prices stabilize now. Investors should consider leveraging regional differences to capture cyclical opportunities, while focusing on sectors with durable demand growth, such as those driven by demographics and global megatrends.

Real assets: Structural transitions underpin the investment case for real assets. Recent geopolitical developments reinforce our conviction that global transitions will increase demand for real assets. Inputs to electrification, digitization, and re-globalization remain attractively valued, positioning real assets as both a hedge against volatility and a source of long-term return.