Global central banks have turned dovish, China stimulus is stronger than expected and trade-war tensions are easing. The cycle is becoming slightly more supportive for equities, but we believe it’s late in the game and upside potential is limited.
We have an underweight preference for U.S. equities, mostly driven by expensive valuations. The U.S. Federal Reserve’s pause on interest-rate hikes has helped push markets up, but wage growth is already threatening corporate profit margins.
Key highlights
- Chinese stimulus is starting to take hold, providing a boost to the APAC region.
- Modest improvement in global cycle conditions possible.
- Fed funds rate forecast: No hikes expected until at least December.
- Limited window of opportunity for equity markets.
- Improving growth outlook in Europe