Tactical Asset Allocation Views – Q4 2019

Macro outlook and tactical asset allocation

Global growth below trend and decelerating

The global economy is rapidly decelerating, and we expect all major regions and countries around the world to grow below their trend rate of economic growth over the next few quarters, and at least through the first half of 2020. For the past six months, our macro regime framework, “Dynamic Asset Allocation through the Business Cycle”, as indicated that the global business cycle is entering a contraction, defined as growth below trend and decelerating. Our proprietary leading economic indicators (LEIs) have fallen sharply across most regions (Figure 1). This weakness has been most pronounced in the manufacturing sector, with global business surveys and industrial orders sharply deteriorating, because of tensions and uncertainty in global trade policy. In addition, business investments and capital expenditure (capex) have stalled, thereby curbing long-term growth expectations.

Figure 1: Identifying macro regimes across major regions and countries
The global economy is growing below trend as of September 2019 and still decelerating from Jan 2019 to Sept 2019

Source: Invesco Investment Solutions team proprietary research, September 2019.