The global economy will likely face a more challenging environment in 2019.
Macroeconomic views: The global economy will likely face a more
challenging environment in 2019. We expect growth to moderate in most
regions and we see the balance of risks as having shifted to the downside. A
contained slowdown in US growth should still make it the main bright spot
versus other major economies: asynchronous growth is likely to remain.
Risks: Unlike previous late cycles, this one will be marked by quantitative
tightening, which could be exacerbated by the risk of overheating in the US.
Other unusual challenges will be geopolitical in nature. Sino-US trade tensions
are likely here to stay, but an escalation could be more disruptive. Tensions
between the EU and Italy and the UK respectively are further risks to monitor.
Asset allocation: We expect returns to be more dispersed and generally lower
in risk-adjusted terms than in the immediate post-crisis years, given a more
volatile macroeconomic and market landscape. Given the economic and
political backdrop and the associated risks, we are now strategically neutral on
equities. But remain underweight fixed income. Crucially, we are ready to add
or reduce risk tactically depending of the evolution of the macro/political risks
highlighted. Our tactical market dynamics indicators are a helpful tool to