Global Asset Allocation Viewpoints

• We maintain a neutral stance on equities reflecting a balanced view between decent fundamentals, including fiscal support and potential for deregulation against expensive valuations.
• We moderated our overweight to real assets following strong performance, particularly in precious metals, though we maintain an overweight position as a hedge to higher inflation.
• We added modestly to small-caps as valuations remain compelling and earnings are poised to inflect positively with tailwinds from lower rates, fiscal policy, deregulation, and potential for increased M&A and IPO activity.

• We maintain an underweight to bonds as inflation and funding requirements associated with U.S. fiscal stimulus and continued deficits could keep upward pressure on rates, particularly at the long end.
• We have a short duration position reflected in an underweight to U.S. long term Treasuries, underweight to Core bonds, and overweight to high yield. We also have an emphasis on inflation sensitivity through an overweight to short-term TIPS.

• We continue to maintain an overweight position in cash, due to reasonable yields and limited duration risk.
• Sector offers liquidity to take advantage of opportunities amid market dislocations.

U.S. equity valuations are elevated but are supported by strong and improving fundamentals. The earnings outlook remains favorable, but any hiccups could be punished more harshly than normal.

Increased fiscal spending, accommodative monetary policy, and reasonable valuations could provide near-term upside. However, a relative dearth of innovation leaders dampens the intermediate-term outlook.

Valuations are attractive, and the longer-term earnings growth outlook is healthy. However, budget concerns remain a significant headwind and the inflation outlook remains volatile.

Both trade policy and political uncertainty have decreased significantly, leading to a fragile but improving economic outlook. Structural improvements in corporate governance remain on track.

Fundamentals are improving despite economic weakness. Fiscal and monetary stimulus are likely to be strong tailwinds over the coming year. However, valuations are slightly elevated.

Economic growth is fragile with low productivity a persistent challenge. Valuations are somewhat elevated despite a weak earnings outlook. However, potential further easing in monetary policy may be supportive.

EM stocks have benefited from capital flight out of the U.S. while the global economy is benefiting from easing trade tensions and rising fiscal stimulus. A weaker U.S. dollar offers a further tailwind.

Credit conditions are bottoming, the housing sector is stabilizing, and further policy support is likely. However, the labor market is soft and the housing market remains a structural drag on growth.

U.S. growth equity fundamentals continue to deliver vs high expectations. Recently introduced tax incentives should also help. However, extended valuations make risk/reward less attractive.

Potential for deregulation, fiscal policy, re-shoring and Fed cuts provide support. Economic growth and housing market activity are showing signs of improvement.

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

Improving monetary and fiscal outlook as well as a normalized interest rate environment have served as a catalyst for improvement. Valuations remain attractive.

Elevated valuations and concentration risks remain a concern. However, very strong and improving fundamentals, particularly within technology have justified valuations thus far.

Mid-cap companies generally have lower leverage and greater potential for quality earnings growth relative to small-caps, but could offer less upside in the cyclical upswing.

Fed cuts, deregulation, fiscal stimulus and stronger M&A and IPO activity could serve as a catalyst to cyclical upswing and also lead to improving smallcap earnings and valuations.

Improving prospects for Europe and inflection in sentiment and more stable outlook in China offer support. However, large-cap exporters face potential headwinds from tariffs and a weaker US dollar.

Cyclical improvement and weaker dollar could provide tailwinds, particularly in Europe, with still very attractive valuations. Small-caps also offer exposure to improving domestic economies.

Could mitigate rising inflation risks, benefits from a weaker dollar, increased energy demand from AI and stabilizing economic backdrop. Precious metals are also benefitting from rising geopolitical uncertainty.

Fed cuts, improving growth and sticky inflation give curve a steepening bias. Credit fundamentals still supportive, with spreads expensive relative to history.

Hedged yields still attractive and lower inflation limits upward pressure on long end, though additional Fed cuts likely to decrease the hedged yield advantage.

Concerns around persistent inflation and fiscal deficits could keep upward pressure on long-end yields.

Risks of stickier inflation remain due to staggered effects from tariffs and more stability to the economic growth backdrop.

Sector offers strong fundamentals and a low duration profile, with a healthy yield and measured expectations for increases in defaults.

Favorable valuations and attractive yields provide support, however, Fed cuts pose a challenge for the asset class.

Attractive yields and room to cut with lower inflation, though higher long-end U.S. interest rates and unclear impact from tariffs on economies are challenges.

U.S. dollar weakness has been a tailwind and is expected to continue, however, longer term fiscal challenges from tariffs remain unclear.