Outlook for 2020

  • Growth will remain slow in 1H 2020, but we have likely seen a bottoming in manufacturing data. A robust labor market will keep consumption strong until the lagged effects of Fed easing help buoy growth in 2H 2020.
  • The economic backdrop is constructive for domestic equitiesvs. fixed income and cash. We recommend staying invested. We expect modest earnings growth and election-related volatility. Current multiples reflect low interest rates and inflation expectations.
  • Non-US developed market (DM) equities feature lowervaluations, higher dividends and comparable earningsgrowth. Growth in global trade, fiscal stimulus and businessinvestment are needed to warrant an overweight.
  • EM equities will continue to benefit from tariff rollbacks and a trade truce. While cheap compared to DM equities, EM equities are close to long-term average valuations.
  • Fed easing and lower forecasted inflation have anchored Treasury yields. We don’t see much upside in yields until core inflation figures exceed the Fed’s target. We maintainsome durationin portfolios but employ shorter duration andnon-Agency MBS strategiesas protection against an upside growthor inflationarysurprise.

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