A just-published report updated our global multi-asset portfolio recommendations and related investment strategy. There are several political and geopolitical risk factors that could undermine global financial asset markets. However, rising global bond yields remain the greatest threat to the liquidity-driven risk-on climate that has boosted equities, corporate credit and other pro-growth assets since late-2023.
The global economy is solid, but policy uncertainty, rising bond yields and already elevated corporate earnings and valuations, warrant only a modest pro-growth investment posture. While supportive today, the boom in corporate profitability is unsustainable and growth will decelerate in 2027, perhaps markedly.
Ultimately, developed market central banks will need to hike policy rates by more than investors currently expect in order to restrain inflation, which will trigger a risk-off phase.
