Global Conservative 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, and 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 the maturing economic cycle warrants exposure to U.S. sectors with a mix of cyclical and secular drivers.
- 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.
- With continued late-cycle growth and low absolute yields, we still favor investment grade corporate bond exposure in the strategy’s fixed-income allocation.
- U.S. Information Technology Equities
- Inv. Grade Corp. Fixed-Income Securities
- U.S. Treasury Securities
- U.S. Consumer Staples Equities
- Emerging Asia Equities