The market is expecting that the US Federal Reserve will lower interest rates in late July, and potentially one more time prior to the end of the year, reversing four years of fiscal tightening that started in 2015. If expectations are realized, the starting federal funds target rate of 2.5% would mark the lowest level that the US economy has entered a Fed easing cycle since the Fed began releasing official rate targets in 1954. The US is not the only region reversing course. It is expected that Europe may enter an easing cycle as early as this week and China took initiatives last year to stimulate slowing growth and industrial production due to US-imposed trade tariffs. Over the past twelve months, the globe’s major central banks have transitioned from dampening growth to now trying to support it.
Moderating global growth does not portend a recession though, and it is still too early to make the recession call in any economic region at this time. Accordingly, we believe it is premature to call the end of the investment cycle. The investment outlook has shifted though and warrants a more conservative approach to allocating capital to risk assets. In this outlook we review recent performance by asset class and region and share our views on the shifting investment landscape.