1. Global growth continues to slow, and the escalation in the trade war, weakness in U.S. data, and politics have increased the probability of a global recession in the next 12 months. The silver lining, at least in the short-term, is that coordinated central bank easing will continue to provide some support to risk assets.
2. We see tactical upside given that sentiment has become very bearish and we are heading into a better seasonal period.
3. Absolute valuations in global equities are not stretched and, relative to bonds, have gotten more attractive with a drop in rates.
4. The U.S. continues to have better growth momentum and earnings momentum versus international markets. Developed markets face less policy flexibility and heightened political challenges, while EM markets face trade headwinds and a persistently strong U.S. dollar.
5. In terms of U.S. sector exposure, we favor an overweight to tech, staples, and REITS.
To view our September Fixed Income Outlook in 5 Charts, click here.
*Source on all charts are Sage and Bloomberg.
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