How to play defense today

By September 9, 2019 11:42

How to play defense today

The US president has remained mercurial on the issue of trade. Having said at the G7 summit that he regretted not being harder on China, President Trump switched towards optimism, saying China wanted "to make a deal very badly." More upbeat comments from China also boosted markets late last week. But despite the more positive tone, we believe visibility over the trade dispute remains limited. Since the trade dispute has become the driving force behind equity markets, even more so than the outlook for monetary easing, we advise against adding significantly to equity exposure, particularly for those with an adequate strategic allocation. We still think the US economy will avoid recession in 2020, supported by Federal Reserve easing and consumer strength. But the outlook could deteriorate further if the trade dispute escalates with the US imposing a 25% rate on all Chinese tariffs, invoking emergency powers to pressure US firms to relocate out of China, or if President Trump adds tariffs to automotive imports. With uncertainty likely to cap the upside for equities for now, we prefer income-generating carry strategies, which should benefit as central banks ease policy in response to weaker economic growth.

By September 9, 2019 11:42


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