Global Asset Allocation Views (2Q17)Contributor Multi-Asset Solutions
- Broadening global growth and signs that the reflation theme is gaining traction create a brighter outlook for risky assets in 2017. Although the U.S. is hiking rates, aggregate global policy remains accommodative and is likely to prevent a sharp spike in bond yields, in turn reducing the risk of a damaging appreciation of the U.S. dollar.
- Stocks in general should perform well, and we favor diversifying exposure across regions. Japan, U.S. and emerging market (EM) equities are set to lead in the first half of 2017; and as event risk in Europe clears, eurozone stocks have scope to play catch- up. Credit is now expensive and unlikely to outperform stocks, but should still beat government bonds.
- Better growth and a higher fed funds rate can push U.S. 10-year yields steadily toward 3% this year. This is hardening our conviction in being modestly underweight duration as the economy moves gradually toward later cycle over the course of the year.
KEY THEMES AND THEIR IMPLICATIONS
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