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Insights Identifying Vulnerabilities
Jul 08, 2019
- Since our last allocation shift in late February, the S&P 500 has gained another 9% while the global equity index has risen almost 8%; for the U.S., the first half of 2019 was the strongest such period since 1997
- The additional equity gains have been supported by expectations for easier monetary policy, wellpositioned consumers, and especially in the U.S., continued large share buybacks
- At this juncture, we believe investors may be discounting too much monetary easing unless the global economy is about to sharply decelerate — in such a scenario, we would expect corporate earnings to slow significantly
- Should global growth only slow modestly into 2020, investors are unlikely to get all they want from central banks — this too would impact rate-sensitive assets as well as expectations for corporate earnings
- Overall, we see a world with growing vulnerabilities compared with market supports — with limited expected upside from here, we want to take another incremental step to reduce equity exposure in favor of more defensive assets