InvestNow News – 2nd Dec 19 – Legg Mason – So, You Thought Things Would Be Easier Huh?
Nov 25th 2019 – Richard Lawrence – Senior Vice President, Portfolio Management
Back in July, I wrote about the idea that we spend more time thinking about what the world might look like six to 12 months forward than what it looks like today, as we try to anticipate what may change in the global economy over that time that may ultimately generate strong performance in our investment portfolios. At the time, I discussed an unfolding global easing cycle that might play out across three major themes:
- Policy Rates
- Central Bank Balance Sheets
- U.S. Dollar
Let’s review how this thesis has been evolving over the past few months:
The bluntest policy tool is the central bank overnight policy rate. We always posited that a shift in sentiment by the Federal Reserve (Fed) would be the cornerstone of the global easing cycle. Once its tone shifted and the Fed easing cycle commenced—three cuts and counting so far—we saw rate cuts by more than 30 central banks over the past six months. Particularly noteworthy is the fact that emerging market central banks have played a large role thus far, which may portend a more positive economic backdrop for them going into 2020. Therefore, the policy rates component of our forecast is on track so far.