Global Investment Outlook

The key change in our outlook is that we now see trade and geopolitical frictions as the principal driver of the global economy and markets. This leads us to downgrade our growth outlook further and take a modestly more defensive investing stance. We expect a significant shift by central banks toward monetary easing to cushion the slowdown.

This policy pivot should extend the long expansion, we believe, and has already triggered easier financial conditions. We remain positive on U.S. equities against a backdrop of reasonable valuations. Coupon income is key in a low-yield world, and we upgrade emerging market (EM) debt as a result. We believe markets are overly optimistic about China’s efforts to boost growth, however, leading us to downgrade China-linked EM and Japanese equities.