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MarketScape · 03.19.24

Tactical Shifts for Balanced Growth

Global economic shifts prompt strategic adjustments in asset allocations, balancing growth objectives with risk mitigation efforts.

  • Markets & Economy
  • Equity Insights
  • ECB
  • Central Banks

Key Points

What it is

We explore a tactical shift toward a more balanced asset allocation prompted by global economic conditions.

Why it matters

Recalibration signifies a proactive stand in portfolio optimization, navigating the dual challenges of seeking returns and managing global risks.

Where it's going

Our focus remains on equipping investors for adaptability, with strategies that anticipate and response to the nuances of global economic shifts.

Recognizing the changing macroeconomic environment and easier financial conditions, we’ve fine-tuned our asset allocations. We are now neutral across all major asset classes. We achieve this by increasing our equity exposure – 3% in developed markets outside the U.S. and 1% in U.S. stocks – and scaling back on investment-grade bonds and cash allocations. Let’s take a closer look.


The U.S. economy remains resilient. We expect growth to be close to trend and inflation to come down slowly. In this environment, the Fed will likely  around the second half of the year.  A similar picture is emerging in some of the key developed markets outside of the U.S. Growth is broadening and several central banks such as the European Central Bank, the U.S. Federal Reserve, and the Bank of England are expected to also cut rates. To be clear, we are not expecting strong growth abroad but an environment of sluggish yet positive growth. Similarly, Japan is benefiting from continued resiliency of the global economy. Slowdown in Chinese growth remains a source of risk. However, this may be already reflected in the underperformance of their stocks.


A combination of easier financial conditions and broadening global growth momentum suggests rising earnings expectations and potentially . Against this backdrop, we are upgrading equities to neutral. We have no regional preferences and are modestly underweight core fixed income, reducing allocations of cash and investment grade bonds. Yields in investment grade bonds haven’t been strong enough to offset the negative drag from the duration effects. In the context of a diversified fixed income portfolio, we are underweight inflation protection bonds in favor of higher yielding bonds.   are low by historical standards, but the combination of lower duration and high yields provide some protection against a backup in rates. We are neutral all other asset classes in the real assets category, all of which serve a strategic allocation purpose. We do not see any compelling reasons to either over or underweight them.


Inflation remaining above central banks’ target is a key risk but we continue to see scope for inflation to come down. Geopolitics is a potential wildcard but markets seemingly have become inured to events. Finally, we also see lingering concerns surrounding commercial real estate and more opaque areas of consumer lending as potential sources of risk. Together, these factors shape our strategic posture, guiding us toward prudent yet forward-looking portfolio adjustments.

Main Point

Mitigating Risk While Pursing Growth

Despite inflation exceeding central bank targets and geopolitical uncertainties, there’s optimism for inflation reduction. Market resilience persists, though commercial real estate and consumer lending present ongoing risks.

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Anwiti Bahuguna, Ph.D.

Chief Investment Officer — Global Asset Allocation

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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