Head - NAM Investment Strategy
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We examine ten key signposts of economic and financial market health for clues about the outlook.
The Fed looks poised to lower rates later this month, which could also give China more room to maneuver looser monetary policy, as trade talks resume. Our 10 Signposts for 2019 point to slow/moderate economic and profit growth ahead. An in-depth analysis of our first signpost follows and suggests a US recession is not imminent. After a strong first half of 2019, we expect more modest investment returns ahead.
1. Leading Economic Indicators: Point to moderating, but still positive global economic growth.
2. Global PMI Surveys: Show the global economy slowing and in need of stimulus.
3. US Treasury Yield Curve: Following years of flattening, it should steepen as the Fed eases.
4. Corporate Bond Spreads: Spreads are at tight levels.
5. Financial Conditions: Financial conditions are at levels that support slow/moderate growth.
6. VIX Index: With VIX in the low teens, hedging now could be a prudent way to safeguard assets.
7. DM Equity Breadth: 87% of developed market indices are trending higher.
8. EM Equity Breadth: 66% of emerging market indices are trending higher.
9. Oil Prices: Are in the middle of the range for this expansion and bull market.
10. S&P 500 Forward 12-Month Earnings: Expected to reach new all-time highs in 2019-2020.
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