In the May issue of our monthly flagship publication, we feature:
- On the Record by Chief Investment Officer Tony Roth, where he talks about the changes taking place on the global economic growth trajectory that have prompted his team to reevaluate its world view, what it means for the stock market in general, and the weighting on international developed equities, in particular.
- In Focus by Senior Investment Strategist Meghan Shue explains the reasons behind the health care sector’s anemic pulse, where policy and politics come into play, and three major themes for transition and innovation that may very well inject a shot of vitality into the segment.
- Investment positioning, major themes, and asset class positioning updates.
At Wilmington Trust, “agile” has become a mantra for managing the firm, whether responding to client needs in a dynamic way, developing new technologies more quickly and efficiently, or pivoting nimbly as we manage portfolios in light of the latest stock market and economic conditions. Fortunately, the nimbleness of agile fits perfectly to the current economic backdrop. Just three months ago it appeared that the global economy was experiencing a synchronized economic slowdown. And nowhere was that story more apparent than in Europe. But the tides have started to turn and, as a result, we have moved quickly to upgrade our view on the trajectory of global growth broadly and on international developed stock markets, in particular.
In recent weeks, we have been encouraged by an improvement in global economic data, especially from China. Significantly, as goes China so goes the fate of Europe, which has significant exposure to Chinese trade. The past year has witnessed a Chinese economic slowdown due to a combination of Chinese policymakers deleveraging and trade tensions escalating. That slowing growth has weighed heavily on export-sensitive economies across emerging and developed markets. Policymakers in China have since reversed course and, over the past 12 months have engaged in several rounds of credit, monetary, and fiscal stimulus. Digesting Chinese economic data in the first quarter is always challenging given holidays and seasonality issues, but we are finally beginning to see evidence in Chinese credit and industrial data that stimulus is gaining traction. The trade tensions between the U.S. and China have also receded significantly as negotiations toward a deal progress. We are not out of the woods, but things are looking up for China.
Another important shift has occurred in the willingness of global central banks to pause their policy tightening efforts (in the case of the Federal Reserve) or even offer more accommodative policy (from the People’s Bank of China and the European Central Bank). A backdrop in the U.S. of “Goldilocks growth”—economic growth that is neither too hot to raise inflationary concerns nor too cold to risk recession—has increased our conviction that the Fed will be much more tempered in raising rates going forward, even if it is not necessarily done hiking for this cycle.
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