Second Quarter Review of Asset Allocation: Risks and Opportunities

July 25, 2019

Overall, the second quarter was positive for financial markets, thanks to strong economic fundamentals and expected Fed stimulus. Unemployment remains low at 3.7% and inflation (1.8% year over year) is near the Fed’s long-term target of 2%. However, there are increasing concerns about a global economic slowdown and early forecasts for 2Q GDP growth are around 1.5%, far lower than what we’ve seen in recent quarters. Globally, the most important trends we see are the following:

• The U.S.-China trade conflict remains ongoing as talks between the two countries resumed, but little progress has been made;
• The Federal Reserve is expected to cut rates in July and markets are forecasting another one to two cuts by the end of the year;
• Business sentiment is declining ­— most notably in the PMI manufacturing index, which is now dangerously close to falling below its growth threshold;
• Britain continues to struggle with its Brexit and elected a new PM (Boris Johnson) on July 23rd;
• China and Europe are expected in increase their stimulus measures to combat slow growth and overall global uncertainty;
• Late-cycle dynamics in credit and equity markets.

The impact of these trends is explored further in this newsletter as we review second-quarter performance and expectations going forward for each of the major asset classes.

Read > Second Quarter Review of Asset Allocation: Risks and Opportunities

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.