When Markets Diverge, Opportunities Emerge


  • We see diverging paths for growth, inflation, and central bank policy around the world. U.S. economic resilience will likely persist, but inflation remains a risk. Amid this outlook, our multi-asset portfolios emphasize quality and diversification.
  • Top-down and bottom-up signals have us modestly overweight equities, with a focus on U.S. large cap stocks, select emerging markets, and some industrial cyclicals. Equity allocations should also help mitigate inflation risk.
  • Central bank policy should bolster fixed income investments in developed markets outside the U.S., such as Australia, Canada, the U.K., and the eurozone. We also favor U.S. agency mortgage-backed securities and several areas of securitized credit, given their attractive risk/reward profiles.

The global economic and market outlook suggests diverging paths among regions and sectors. Last year, overall global growth looked stagnant, but trends this year suggest potential for a soft landing instead of a recession – mainly due to the continuing strength in the U.S. economy. But that resilience comes with risks: most notably, the potential for hotter inflation.

The diverging macroeconomic outlook creates compelling opportunities among asset classes.

In fixed income markets, we’re adding to our investments in select countries outside the U.S. where easier monetary policy this year is likely to boost bonds. And in equities, while we continue to favor high quality companies – which are poised to withstand a range of macro scenarios – we’re increasing allocations to a broader range of sectors, including industrial cyclicals. Diversification and flexibility remain crucial, and active management can help uncover intriguing ideas while managing risks.

Overall, we see a target-rich environment for multi-asset portfolios.