Global Asset Allocation Viewpoints

• Aligning with our view on moderating risk, we lowered our equity allocation to a neutral position and added to cash given potential headwinds to growth from tariffs and trade.
• Within equities, we continue to favor value-oriented sectors, which are supported by more reasonable valuations and should benefit from a continued broadening away from U.S. large-cap growth.
• Within regions, we see better opportunities outside of the U.S. on more compelling valuations as well as improving sentiment supported by increased fiscal spending and accommodative central banks.

• We maintain an underweight position to bonds given potential for upward pressure on U.S. interest rates reflecting potential for increased supply to accommodate U.S. fiscal policy.
• In line with overall derisking, we trimmed exposure to spread sectors including high yield, emerging market bonds, and floating rate loans. While fundamentals remain broadly supportive, spreads could be vulnerable to disruptions associated with trade policy.
• We increased inflation sensitivity and trimmed U.S. duration by adding to short-term TIPS and increasing hedged global ex-U.S. bond exposure, funded from long-end U.S. treasuries.

• We remain overweight cash, as it still provides attractive yields and liquidity.
• Cash could provide liquidity to take advantage of market opportunities amid expected volatility.

AI monetization and capex spend continues to be scrutinized though Mag 7 earnings have largely held up. Valuations remain elevated despite recent sell-off.

Potential for support from deregulation, continued broadening earnings growth as well as prospective fiscal policy support and re-shoring; however, tariffs could pose a significant economic growth risk.

Growth stocks’ valuations are more expensive and are more levered to global trade. Persistent consumer weakness in emerging markets presents another headwind.

A paradigm shift in the fiscal spending outlook combined with still dovish monetary policy and a normalized interest rate environment should catalyze improvement.

Elevated valuations and concentration risks remain a concern. However, strong fundamentals and healthy free cash flow levels offer a buffer against economic slowdown.

Mid-cap offers less exposure to financing risks and more potential for higher quality earnings growth relative to small-caps as well.

Economic growth uncertainty and lack of pricing power could pose challenges. However, potential for deregulation and stronger M&A activity supportive.

Trade uncertainty and geopolitical risk remain concerns, however, improving stimulus outlook and stabilization in Chinese growth offers support.

Monetary easing, weaker dollar, and less exposure to trade policy could provide tailwinds with still very attractive valuations.

Sector offers protection against sticky inflation. Increase in precious metals prices has been beneficial. Recent overproduction by OPEC has been a short-term drag on oil prices.

Softer growth weighing on yields, while sticky inflation could keep upward pressure. Credit fundamentals supportive, with spreads reflecting uncertainty.

Hedged yields more attractive with potentially less upward pressure on longer end than U.S. Treasuries, while central banks have more room to cut.

Despite lower growth expectations, increasing concerns around stickier inflation and prospects for increased issuance to sustain fiscal deficits may bias yields higher.

Inflation could remain sticky or surprise higher due to effects from tariffs, while recent drop in oil provides an attractive entry point into short-term breakevens.

Spreads are more reflective of current market uncertainty, but sector still offering a healthy yield with supportive fundamentals and still muted default expectations.

Valuations have become more reasonable, however, liquidity considerations amid increased uncertainty likely to weigh on the asset class.

Despite attractive yields, risks to EM include tighter financial conditions from potentially higher U.S. interest rates and tariff uncertainty.

Recent U.S. dollar weakness has been supportive, though path forward for USD and fiscal challenges from tariffs both remain uncertain.