The Weekly Strategy Report (January 14, 2019)Contributor Multi-Asset Solutions
- Following a year of weak performance, emerging market equities have made a strong start to 2019 as investor sentiment has turned more positive, helped in part by recent stimulus measures from China.
- Nonetheless we remain cautious about whether Chinese stimulus will act as a catalyst for a sustained emerging market equity rally over the near term. Further deceleration in China’s economic growth in 1H19 will likely pose challenges to emerging markets and while we expect more stimulus measures from China, they will likely be of a smaller scale than prior rounds, given concerns about leverage in the economy.
- Amid slowing global economic growth momentum and tightening financial conditions in the U.S., we maintain a small underweight in stock-bond in our multi-asset portfolios, a move we initiated at our November Strategy Summit. We have also moved from neutral to underweight emerging market equities.
EXHIBIT 1: PERFORMANCE OF MSCI EM INDEX DURING PAST EASING CYCLES IN CHINA
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