Consumer
In Section I, Doug highlights that benchmark positioning in equities, fixed income and cash is now recommended. Still, the US macro situation warrants continual monitoring, given weakening labor market momentum. In Section II, Jonathan shows how valuation-adjusted fundamental momentum has been a successful tool for ranking global sectors.
In Section II, Jonathan shows how valuation-adjusted fundamental momentum has been a successful tool for ranking global sectors.
While it is not yet time to bet against risk assets, we push back on the increasingly popular ideas that the wealthiest households and/or AI-related capex can keep the expansion going despite the wobbling labor market.
US GDP growth appears to have accelerated even as employment growth has faltered. We will make a final decision in early October when we publish our next Strategy Outlook, but most likely, we will cut our 12-month US recession probability to 40%-to-50% from 60% and turn tactically neutral on stocks, while still retaining a modest equity underweight over a 12-month horizon.
Inflation expectations in the US remain reasonably well anchored and there are few signs of a brewing wage-price spiral. Thus, the near-term risks to growth outweigh the risks of higher inflation. Looking beyond the next year or two, however, we are worried about stagflation.
