Chris Ainscough

We expect US growth to moderate but we do not expect a significant downturn. Meanwhile, growth in other developed markets should remain resilient, narrowing the gap with the US. Global growth faces headwinds from US tariffs, though we believe the impact will be limited. Inflation in the UK, US, and Japan is likely to stay modestly above target, while Europe presents a more benign outlook. Given this, we see the ECB holding rates steady, while the BoE and the Fed may cut further. The latter driven by political pressure and labour market concerns. Against this macro backdrop, we reaffirm our neutral outlook on developed market equities.

We remain underweight EM and Asia Pacific but are positioning for a bull case if global growth proves resilient and the Fed eases further. Our core Asia Pacific holding is India, with significant allocations to Korea and Taiwan. We remain underweight China despite the recent market rally, which we view as disconnected from deteriorating fundamentals. We maintain our conviction in EU small caps. As multi-asset portfolio managers, we see active fixed income management as essential to portfolio construction. In lower-risk portfolios, we see short-dated pan-European credit as an attractive yield enhancer without too much additional interest rate risk. Actively managed high yield can still deliver equity-like returns with fixed income volatility, enhancing risk-adjusted performance. In higher-risk portfolios, we favour UK and US sovereign bonds at the 10-year point as risk anchors to diversify equity exposure in the event of a downturn.

‍