The latest Global Outlook argues that while such concerns are premature, the downdraft signals a more general end to the unusually stable market conditions of 2017. In the current economic environment, Global Outlook turns tactically cautious on risk, scaling back its longstanding equity overweight position over fixed income to a mild underweight, with most going into US fixed income. Barclays Research moves to a more selective outlook on emerging market assets, also a change from a longstanding EM overweight recommendation.
Global Outlook highlights two developments that have improved the asset allocation calculus for bonds:
- The year-to-date re-pricing of financial assets has enhanced the relative appeal of fixed income, mainly in the US.
- Financial market volatility has returned as investors respond more normally to news flow about economic, political and business risks.