Global Equity portfolio outlook, positioning, and attribution as of 12/31/2019
December 31, 2019
- We anticipate positive economic growth and market returns in 2020, though moderate growth faces risks and equity returns are unlikely to match 2019 levels.
- We expect global equity returns in 2020 to be driven by moderate earnings growth, as valuations are at cyclical highs.
- With global equity valuations back near cyclical highs, we expect increased volatility, along with increased dispersion among sector performance.
- International economies and markets still face uncertainty from Brexit and the ongoing U.S./China trade dispute – a limited trade deal is unlikely to bail out EM Asia and other trade-dependent regions.
- Interest rates are historically low, and while modest inflationary pressures may support some upside to longer-term rates, we do not anticipate aggressive easing by the Fed that would lower short-term interest rates materially.
- We believe moderate growth and an advanced economic cycle warrant exposure to U.S. sectors with a mix of cyclical and secular drivers, like Information Technology and Comm. Services, as well as sectors with limited economic sensitivity like Consumer Staples, Health Care, and Utilities.
- We continue to avoid U.S. sectors with some of the highest economic sensitivity, such as Industrials, Materials, and Energy.
- We remain underweight international equities, given continued macroeconomic headwinds abroad, and have further reduced exposure to emerging Asia, where expanded valuations seem overly optimistic amid ongoing trade friction.
- U.S. Information Technology
- U.S. Industrials
- U.S. Real Estate
- U.S. Consumer Staples
- Emerging Asia
- U.S. Financials