As we move into the first weeks of 2020, the Investment Solutions Group is optimistic that equities and other growth assets can continue to drive ahead, albeit at a slower pace than we experienced in 2019.
From a macro perspective, there are two drivers to our directional overweight to equities. First, after several months in the Normal Risk range, our proprietary Market Risk Indicator (MRI) which looks at global and multi-asset class risk sentiments, has moved to Low Risk aversion. As such, we have adjusted our US model portfolio tactical positions to take advantage of the current market environment.
Secondly, we believe continued central bank support will warrant an overweight in equities. Between the Federal Reserve’s communication that rates are on hold for some time, and the expected expansion of central bank balance sheets to support economic growth, there will be significant liquidity in the system. This will provide a tailwind as we enter the new decade.