Originally Published at GAM.com | October 3, 2019
Over the final quarter of 2019, the tug of war between economic resilience and recession risk is likely to dominate market outcomes and asset allocation decision making. The asset allocation committee outlines its views below.
Binary outcomes
Over the past three months, markets have become prone to greater volatility and frequent reversal. The underlying cause is shifting perceptions about global growth. At mid-year, concerns that weakness in trade and manufacturing would spill over to services, employment and consumption led investors to anticipate significant monetary policy easing. Bond yields plunged and equities slumped as earnings estimates were cut. Then, in early September, markets abruptly reversed as positive growth surprises lifted bond yields and equity markets. Fleetingly, cyclically sensitive sectors and value outperformed more defensive plays.
Over the remainder of the year asset allocation performance is likely to remain dominated by shifting global growth expectations. Recession or resilience: getting that call right will be the critical determinant of portfolio performance in the final months of 2019. Continue Reading