FACTOR VIEWS 3Q 2019
Factor performance was negative, on balance. Equity momentum gained, but event-driven factors were mixed and whipsawing commodities markets challenged macro factors. Looking ahead, we are most bullish about the prospects for the value factor.
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GLOBAL ASSET ALLOCATION VIEWS 3Q 2019
Trade disputes are raising the downside risks to our forecast for slightly subtrend growth. We retain our mild underweight to stocks and prefer to take risk in carry assets like credit. Reflecting valuations, we downgrade duration to neutral.
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GLOBAL FIXED INCOME VIEWS 3Q 2019
Given trade escalations, Sub Trend Growth is our base case (45% probability) with Recession probability at 20% as consumer and corporate confidence erode. Favored sectors: three- to five-year corporates, long government bonds, and short securitized credit.
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GLOBAL EQUITY VIEWS 3Q 2019
After a strong first half, we are a little cautious, but see no reason to move aggressively away from equity exposure. Many defensive stocks are richly priced, we see opportunity in out-of-favor value, and we continue to monitor trade tensions.
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