Why are people talking about Brexit risks...again?
Brexit risk is not a thing of the past. As the 11-month transition period progresses, look out for the negotiations to become a source of heightened volatility.
Our updated views reflect a moderately greater risk tolerance and a recognition that central banks are “all in.” We are neutral stocks vs. bonds, prefer U.S. equities, overweight investment grade credit and reduce duration to a small underweight.
Investors should be braced for further near-term declines in stock markets. But the combination of highly negative sentiment and attractive valuations presents a solid longer-term buying opportunity. Essentially everything in on sale.
We adjust down our 2020 growth and return expectations for emerging market debt and introduce new base and bear case scenarios, as rapid transmission of the COVID-19 coronavirus slows economies around the world. We have increased the probability of our bear case scenario, which expects a technical recession in the first half of 2020.