- Our outlook for moderate U.S. economic growth remains intact, while some late-cycle signs of slowing growth affirm our view that a sustained economic reacceleration is unlikely.
- While European GDP growth should remain positive in 2019, overall growth in Europe remains low, and structural issues ranging from Brexit to restrictive labor laws present continued headwinds.
- In Asia, signs of slow but improving economic trends in Japan contrast with economic deceleration in China, but Asian markets stand to benefit as trade tensions ease.
- Volatility is likely to continue as sentiment shifts in a moderate economic growth environment can play an outsized role in short-term market movements.
- We favor U.S. equity sectors with both cyclical and secular tailwinds, like Information Technology and Communication Services, and sectors with limited economic sensitivity, like Consumer Staples and Utilities, while avoiding the most economically-cyclical sectors.
- An underweight to Europe reflects our expectation that economic growth trends are unlikely to improve in the near-term.
- We see better international opportunities in Asia, where modest growth expectations and low relative equity valuations have improved the region’s risk/reward profile.
• U.S. Information Technology
• U.S. Financials
• Western Europe
• U.S. Health Care
• U.S. Consumer Staples
• U.S. Industrials