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2019 Outlook

U.S. Lands Softly, Converges with Rest of the World

In 2018, late-cycle fiscal stimulus in the U.S. spurred stronger growth at a time when the unemployment and savings rates were low and inflation was already slowly trending upward. U.S. economic growth will likely slow in the first half of 2019, converging with the pace of global growth as the effects of the 2017 tax reform and fiscal stimulus fade. A combination of a higher U.S. current account deficit and federal budget deficit will likely moderate the recent strong U.S. dollar trend. In emerging markets, valuations remain attractive and their long-term growth story is still positive. In the near-term, we expect a more favorable U.S.-China trade relationship and the traction of Chinese stimulus to catalyze emerging market growth, though this is not assured. In short, 2019 will likely be a story of convergence.

Global Landscape

We’ve examined macroeconomic conditions (via indicators such as the Purchasing Managers’ Index), policy guidance (interest rates), and current real yields to help you understand some of the most crucial factors for global investing. Explore selected economic and financial data for countries around the world below.

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Global Landscape We’ve examined macroeconomic conditions (PMI), policy guidance (interest rates), and current real yields to help you understand some of the most crucial factors for global investing. Click on the tabs to understand the different factors affecting your investing.

 

Asset Allocation Views

Stocks remain cheap to bonds and should continue to outperform bonds throughout the rest of this elongated cycle. Notably, U.S. corporate bonds—investment grade and high yield—remain overvalued on a relative basis and will remain so until the next recession.

International assets remain very cheap relative to the U.S. Regardless of short-term relative performance in 2019, the long-term returns of international assets are likely to be higher, given current valuations.

FavoredFavoured Equity Assets
Why is this favored?
Related Funds
Emerging Markets
Developed Markets
Want more details? Click on the plus icon to see why this asset class is favored, including related content.
  Equity - Emerging Markets
ODVYX
Equity - Emerging Markets
Why is this favoredfavoured?

Short-term weakness in emerging market stocks could prove to be a buying opportunity for long-term investors.

United States
International
Equity - United States
Why is this favoredfavoured?

There are several headwinds facing European stocks, but investors shouldn’t get too pessimistic as much of the bad news has already been priced in.

Equity - Growth
Why is this favoredfavoured?

We expect U.S. growth stocks to continue outperforming because of rising short-term interest rates, a flattening yield curve, tightening monetary policy, heightened volatility and peaking economic growth.

FavoredFavoured Fixed Income Assets
Details
Related Funds
Emerging Markets
Developed Markets
Fixed Income - Emerging Markets
Why is this favoredfavoured?

Emerging market fixed income remains one of the best opportunities for investors. Low valuations, strong fundamentals, and a weaker U.S. dollar should all benefit EM bonds in 2019.

Corporate Credit
Treasuries
Fixed Income - Corporate Credit
Why is this favoredfavoured?

Most U.S. credit is at fully valued levels in the U.S. Investors should expect coupon-like returns and little further price appreciation in 2019.

Short Duration
Long Duration
Fixed Income - Short Duration
Why is this favoredfavoured?

2019 will likely see a continuation of the Fed’s rate hike path. In that environment, short-duration assets will likely outperform as benchmark rates move gradually higher.

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