Keeping a relatively neutral position with a view to increase risk early 2020.
Very strong asset class returns during 2019 leaves us cautiously positive towards end-year. Our Asset Allocation View has moved from a slight equity overweight to a neutral positioning during Q4 2019. Equities still seem to provide the best risk adjusted return expectations going forward. However, continued strong performance keeps us from going overweight at the moment. Tight credit spreads do not provide a lot of upside potential, whereas government bonds have some room to tighten further if recession probabilities should increase.
Inflation out of control? You might expect to see an inflation chart like this in an emerging market, but this is happening in the 5th largest economy in the world.
The almighty (and confusing) US consumer. US economic health is intricately tied to consumer behaviour with personal consumption accounting for ~70% of GDP. Predicting whether or not Americans will keep opening their wallets for a new car, a night at a restaurant or a nice vacation has far reaching implications.
Pricing power is back! Inflation remains top of mind for investors but has filtered through to Main Street. This chart from Macrobond Financial shows that more companies are planning to raise prices than at any time in the last twenty years.