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MarketScape · 02.12.24

Global Portfolio Update: Equity Markets Appear Near Fair Value

A resilient U.S. economy and strong earnings outlook have supported high stock valuations, while more modest valuations in Europe and emerging markets reflect uneven trends.

  • Markets & Economy
  • Multi-Asset Insights
  • Fixed Income Insights
  • Equity Insights

Key Points

What it is

We outline our global portfolio allocation amid a resilient U.S. economy and uneven outlooks in Europe and emerging markets.

Why it matters

A stronger outlook in the U.S. may support higher stock valuations while modest valuations outside the U.S. reflect weaker outlooks.

Where it's going

We maintain close-to-benchmark allocations for most regions except Europe, where we hold a slight underweight equity position.

We expect a in the U.S. and uneven growth in developed economies, and we believe valuations of most equity markets reflect this thinking. Therefore, in our global portfolios, we hold a largely neutral position relative to our strategic benchmark allocations. Let’s take a closer look.


U.S. economic growth continues to surprise on the upside, so much so that we have questioned whether our “goldilocks” scenario of faster growth with low inflation could replace our soft landing scenario of slowing growth.  However, a deeper dive into growth and inflation dynamics convinced us to maintain our outlook for deceleration in U.S. growth with inflation falling towards Fed’s target of 2%. Forward looking drivers of labor demand and supply suggest this slowdown is likely to come. Outside the U.S., growth in markets is much more uneven. We see higher growth in absolute terms in China and improvement in nominal growth in Japan. But weakness in the U.K and eurozone is likely to continue.


The earnings outlooks for U.S. and emerging markets appear strong, with modest expectations for other developed markets. However, market reflect this, where U.S. valuations are on the upper end of their long term history.  Most other regions show valuations close to long-term medians. Given our outlook, we maintain close-to-benchmark allocations for most regions except developed international equities where we hold a slight underweight position. We expect the Fed to cut rates this year but perhaps not as much as the Treasury market is pricing in. In fixed income, we maintain close to neutral allocations for most sectors except high yield bonds, which we favor over  . We are worried about a potential risk scenario where continued conflict in the Middle East raises oil prices and makes it harder for the Fed to act this year.  later in the year are another potential source of market volatility.


Overall, we hold a slightly underweight position to risk with a modest underweight to global  equities and inflation protection bonds. We prefer high yield bonds where attractive yields help cushion potential losses if riskier segments of the market underperform.

Main Point

Uneven Outlooks

A surprisingly strong U.S. economy and a positive outlook for earnings have supported high U.S. equity valuations this year. The outlooks in emerging markets, eurozone, U.K. and Japan are more uneven, but most equities in most regions outside the U.S. have near-average valuations. Globally, we think equity valuations are near fair value.

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Anwiti Bahuguna, Ph.D.

Portfolio Manager

Anwiti Bahuguna, Ph.D., is chief investment officer of global asset allocation for Northern Trust Asset Management. She is responsible for managing investment performance, process and philosophy for multi-asset strategies globally. Anwiti leads NTAM’s strategic asset allocation, tactical asset allocation and capital market assumptions, and oversees the portfolio construction group and multi-manager business.

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Northern Trust Asset Management (NTAM) is composed of Northern Trust Investments, Inc., Northern Trust Global Investments Limited, Northern Trust Fund Managers (Ireland) Limited, Northern Trust Global Investments Japan, K.K., NT Global Advisors, Inc., 50 South Capital Advisors, LLC, Northern Trust Asset Management Australia Pty Ltd, and investment personnel of The Northern Trust Company of Hong Kong Limited and The Northern Trust Company.


Issued in the United Kingdom by Northern Trust Global Investments Limited, issued in the European Economic Association (“EEA”) by Northern Trust Fund Managers (Ireland) Limited, issued in Australia by Northern Trust Asset Management (Australia) Limited (ACN 648 476 019) which holds an Australian Financial Services Licence (License Number: 529895) and is regulated by the Australian Securities and Investments Commission (ASIC), and issued in Hong Kong by The Northern Trust Company of Hong Kong Limited which is regulated by the Hong Kong Securities and Futures Commission.


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