Global Asset Allocation Viewpoints

• As uncertainty around trade persists, we trimmed our overweight to equities, but remain modestly overweight supported by still solid earnings growth and potential for pro-growth fiscal policies.
• Within equities, we favor value, which should benefit from a continued broadening away from U.S. large-cap growth, where valuations are more expensive.
• Within regions, we see better opportunities outside of the U.S. on improving sentiment supported by increased fiscal spending as well as dovish central banks.

• We maintain a modest underweight position in bonds as we expect rate volatility to persist around mixed growth and inflation data as well as policy uncertainty.
• We remain overweight spread sectors including high yield, emerging market bonds, and floating rate loans on attractive all-in yields. Fundamentals remain supportive, although spreads are vulnerable to impacts of trade uncertainty.
• We added to global bonds outside the U.S. on a USD-hedged basis given attractive yield levels following recent shift upward in rates.

• We remain modestly overweight cash, as it still provides attractive yields and liquidity.
• Cash could provide liquidity to take advantage of market opportunities amid expected volatility.

U.S. equities face a difficult near-term environment given extreme policy uncertainty, potentially peaking capex spending, and elevated valuations.

Upside economic surprises, the potential for increased fiscal spending, and reasonable valuations could provide near-term upside. However, the possibility of an extended trade war clouds the outlook.

Valuations are attractive, and the U.K. is less susceptible to tariffs than continental Europe. Economic growth may be challenged over the near-term, but longer-term outlook is healthy.

Modestly higher inflation coupled with rising wages are welcome changes, given the positive impact on consumption. Corporate governance improvement remains an intermediate-term tailwind.

The possibility of an extended trade war significantly complicates the outlook. However, corporate fundamentals and monetary policy are supportive, and political changes are expected to be business friendly.

Labor market remains very strong and commodity prices improving due to China stimulus. However, valuations are elevated despite tepid earnings growth.

Stock valuations are attractive. Global economic growth likely to benefit from monetary policy tailwinds. However, tariff uncertainty is a notable area of concern.

Credit conditions appear to be bottoming, the housing sector is stabilizing, and further policy support is expected. However, structural challenges remain and tariffs could pose a headwind.

AI monetization and capex spend continues to be scrutinized as earnings outlook has begun to deteriorate. Valuations remain elevated despite recent sell-off.

Expectations for deregulation and manufacturing sector improvement supportive of cyclical sectors and could lead to continued broadening of earnings growth, although slower economic growth a risk.

Growth stocks’ valuations are more expensive and face headwinds from persistent consumer weakness in emerging markets.

A paradigm shift in the fiscal spending outlook combined with still dovish monetary policy and a normalized interest rate environment should catalyze improvement.

Elevated valuations and concentration risks remain a concern. However, strong fundamentals and healthy free cash flow levels offer a buffer against economic slowdown.

Mid-cap offers less exposure to financing risks and more potential for higher quality earnings growth relative to small-caps.

Economic growth uncertainty and higher-for-longer rate environment have posed challenges. However, potential for deregulation and stronger M&A activity supportive.

Trade uncertainty and geopolitical risk remain concerns, however, improving stimulus outlook and stabilization in Chinese growth offers support.

Monetary easing, lower inflation, and less exposure to trade policy could provide tailwinds with still very attractive valuations.

Sector offers protection against sticky inflation. Increase in precious metals prices has been beneficial, while peaking shale productivity could ultimately lead to higher oil prices.

Softer growth weighing on yields, while sticky inflation could keep upward pressure. Within credit, fundamentals supportive, though spreads remain tight.

Hedged yields more attractive. Lower deficits in key regions outside the U.S. allowing for increased fiscal spend, while central banks have room to cut.

Lower growth expectations weighing on yields, however, concerns around stickier inflation and increased fiscal uncertainty remain.

Inflation could remain sticky or surprise higher due to effects from tariffs, however, breakeven levels are largely reflective of these risks.

Spreads have widened recently on increased uncertainty but remain tight on supportive fundamentals and still muted default expectations.

Less aggressive Fed cutting path should benefit floating rate loans with valuations attractive and still strong underlying fundamentals.

Sector supported by attractive yields, but risks include tighter financial conditions from a stronger U.S. dollar and rising U.S. interest rates.

Attractive yield levels, while U.S. dollar uncertainty and fiscal challenges continue to pose headwinds.