- A backdrop of slowing global growth has meant that shocks to confidence from factors like global trade tensions or monetary policy news can have an outsized impact on markets.
- Manufacturing globally had already been in recession even prior to the recent trade escalation.
- Another factor that may weigh on market sentiment is the recognition of the likely diminished impact of central bank support.
- While we still expect a baseline where growth continues in the near term, we have noted the rising probabilities of recession and an expectation for it over a secular horizon.
- The very inverted U.S. yield curve likely reflects this same perspective. As the fundamental backdrop remains fragile, so too are markets where valuations remain elevated from a long-term perspective across asset classes.
Bottom line: We suggest investors focus on diversification and resiliency in a world where disruptions to both the economy and markets will likely underpin a bumpier ride ahead than what markets had faced for the better part of a decade since the last recession.
Read more of our analysis of market volatility >