In focus

• The US economic expansion has now broken historical records. But political upheaval threatens the outlook. While the tariffs themselves are unlikely to be fatal for the expansion, the indirect consequences on corporate investment pose more of a risk.

•  The Federal Reserve is under enormous pressure to cut rates and keep the US show on the road ahead of the presidential election next year. This may support activity to some degree but the US economy and earnings will slow as the effects of the tax cuts fade.

• Any reticence that Beijing has shown over opening the spigots to defend China’s growth is well behind us. The questions now are around the speed with which policy measures will take effect and the overseas implications.

• Europe is the region that appears most vulnerable to trade war repercussions. While it’s not yet clear whether the European auto industry is next on President Trump’s hit list, the uncertainty is taking a toll – and the scope for policy support is limited.

• Historically, investors have tended to benefit from de-risking towards the end of the cycle, but with the picture unusually clouded and central banks having failed to normalise rates this time around, it’s less clear that domestic bonds and cash will play their usual role for European investors.

• It therefore seems to make sense to maintain a defensive equity allocation for now, while looking to alternatives such as macro funds and real assets to provide a potential portfolio cushion.