Summary

  • It would seem that there is little reason to expect that the coming year will be all that different than what has played out from an underlying economic perspective over the last few years.
  • The baseline outlook appears to point to continued positive global growth underpinned by the still healthy US consumer, while moderating inflationary pressures could allow central banks to continue on the path toward more “neutral” stances that, in turn, will give some support to the more rate-sensitive goods-producing activities.
  • Such a backdrop would again be constructive for further gains across financial markets.
  • The rise in geopolitical uncertainty and the attendant increase in headline risks that may come as a result of the government transition in the US, however, represents a material risk that could mean the path forward is not without some bumps.
  • Moreover, a particularly inimical approach to international policy may well perpetuate the performance gap between the US and the rest of the world experienced over the last two years.
  • While it may well end up being that the more onerous proposals presented on the campaign trail are nothing more than negotiating tactics that may not come to fruition, the threats and their negative economic consequences cannot be dismissed out of hand and may weigh on market sentiment and increase market risk premia. That would suggest that placing an added emphasis on risk management and exposure to higher-quality assets that are best positioned to weather the volatility may be prudent.