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Quarterly Perspectives

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LATEST QUARTERLY PERSPECTIVES

The length and strength of expansions

Theme overview

U.S. economy: Health risks in old age

Getting to slower, faster

  • July will officially mark the current expansion as the longest on record at 11 years, surpassing the 10-year expansion of the ’90s.
  • While growth surprised to the upside in the first quarter at 3.2% y/y, recent data on manufacturing, trade, capital investment and consumer activity suggest second-quarter growth may be weaker than expected.
  • Going forward, we still expect growth to decelerate to a more trend-like 2.0% y/y pace by the fourth quarter. However, there are downside risks, given trade tensions continue to cast a cloud of uncertainty.
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Theme overview

Fixed income: Flexibility in an uncertain environment

Global central banks are likely to be accommodative in the face of deteriorating economic data

  • Given slowing growth and intensifying trade tensions, the Federal Reserve may cut rates twice in 2019. Global central banks are broadly mirroring the Fed’s caution, carefully taking stock of their respective economies and prospects for growth.
  • Investors prepared for rising rates may consider falling rates once again, and review their fixed income holdings in light of potential monetary policy changes ahead.
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Global monetary policy


Corporate profits

Theme overview

U.S. equities: Adding income amidst uncertainty

Positive growth, but plenty of downside risks

  • Renewed trade tensions should lead to continued volatility in equity markets and prevent multiples from expanding.
  • With multiples likely capped, any further appreciation in equity markets will have to be driven by earnings growth, which is likely to be low to mid single digits in 2019 and 2020.
  • Late cycle dynamics combined with elevated geopolitical and policy uncertainty increase the need for investors to dampen volatility by striking a more balanced total return profile between dividends and capital appreciation.
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Theme overview

International equities: Navigating choppy waters

Do clouds mean a deluge?

  • In early 2019, sentiment improved, as investors grew more optimistic that global economic growth would soon stabilize. However, this optimism was disrupted by the escalation of trade tensions in May.
  • In the medium term, the most likely path seems one in which lingering trade uncertainty continues to dampen global business and investor sentiment.
  • Nonetheless, international equities, particularly emerging markets, continue to deserve a place in portfolios.
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Global economic growth

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