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Investment Perspective · 06.16.23

From Concern to Churn

We are now underweight equities globally as recession conditions develop in Europe, U.S. valuations hover above long-term fair value, and China struggles with its economic recovery.
  • Portfolio Construction
  • Stock Market
  • Federal Reserve
Format
Key Points
What this is
We outline our portfolio positioning after banking sector concerns have waned, the U.S. government reached a debt‑ceiling deal, and the European economic outlook has worsened.
Why it matters
The decline in debt‑ceiling and banking‑sector risk has boosted U.S. equities, which now appear expensive based on our estimates of fair value.
Where it's going
We are now underweight equities in our global portfolio model, based on our outlook over the next year.
Main Point

Our base case: limited equity upside

While we believe the Federal Reserve is at or near its peak rate for this cycle, the durable labor market and sticky core inflation may keep rates elevated into next year. And, with the U.S. equity market valuations above what we believe is long-term fair value, we see limited upside in the equity market.

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