Despite a few bouts of volatility, risk assets are broadly higher thus far in 2019. Yet, bond yields have plunged, signaling a weak economic outlook and expectations of further central bank easing. To be sure, the global expansion has decelerated and become more uneven—but our base case macro assumption does not call for a further, significant deterioration in growth or an outright contraction. Central banks’ dovish pivot and China’s fiscal stimulus should help stabilize growth and extend the current cycle. However, we see a high degree of uncertainty and a wide range of plausible economic outcomes. At the same time, asset valuations across most categories are somewhat above historical levels.
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