Protectionism

Headwinds from protectionism, fading fiscal stimulus and less favourable financial conditions continue to weigh on the global economy. After strong growth in 2017 and 2018, we are expecting a mild slowdown to rates that remain quite good by post-crisis standards.

Tightening policy

Central banks are no longer actively tightening monetary policy and bond yields will probably be contained. We have lowered our forecasts for 10-year sovereign bond yields across major regions versus last quarter.

Good run for stocks

Stocks have had a good run so far this year and, in our view, economic growth should be sufficient to deliver moderate corporate-profit gains that would sustain mid-to-high single-digit increases in North American equities, and low double-digit returns in international and emerging-market stocks.

Executive summary

Central banks pivot to a dovish stance, dampening concerns over rising rates and providing support for risk assets. But headwinds from protectionism, fading fiscal stimulus and less favourable financial conditions continue to weigh on global growth trajectory.

Executive summary

Japanese yen to rise to 102

Euro to rise to 1.20

Still more life in EM currencies

Asset class commentary

After enjoying solid and accelerating global growth in 2017 and through the first half of 2018, we saw momentum wane last quarter, and we expect this trend to continue in 2019. We therefore budget for a mild deceleration in growth going forward, but to rates that remain quite good by post-crisis standards.

Asset class commentary

Equity markets

The world’s major stock markets suffered double-digit declines in 2018 and our composite of global market valuations had fallen to its lowest level in seven years, boosting total return potential and setting up the preconditions for the subsequent rally.

Economy

Headwinds from protectionism, fading fiscal stimulus and less favourable financial conditions continue to weigh on global growth trajectory.

Fixed income

Against a backdrop of slowing growth, less inflation and increased financial-market volatility, central banks are no longer actively tightening monetary policy and global sovereign bonds rallied in the past quarter.

Capital markets performance

The U.S. dollar weakened against all four key currencies in the quarter ended February 28, 2019, marking a reversal after the greenback strengthened last year against most currencies. The U.S. Federal Reserve’s (Fed) decision to delay further interest-rate hikes and mounting evidence of a slowing U.S. economy were likely instrumental in turning back the trend.

Capital markets performance

Direction of rates

Covering the U.S., Germany, U.K., and Canada – what's our expectations? 

Regional preferences

We recommend overweighting U.S. Treasuries by 5 percentage points, against 2.5 percent underweight positions in both German bunds and JGBs. The gap between U.S. and German bond yields remains wide by historical standards.

Emerging markets outlook

We are cautiously optimistic about emerging-market equities and do not believe that the performance pattern witnessed in 2018, when the market peaked at the end of January and collapsed for much of the rest of the year, will be repeated in 2019.

Emerging markets outlook

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Our quarterly publication providing a detailed global investment forecast, including updates on economic and capital markets.