William Dinning

We are overweight equities and underweight fixed income. Within fixed income, we have a higher allocation than normal allocation to government bonds. Within a multi-asset portfolio, we think that the government bond allocation will be negatively correlated to equities in an equity downturn.

A risk to the view is that investors have become even more bullish on the outlook for the US economy and stock market since the Presidential election. Trump will have a pro-growth (tax cuts) and pro-business (low regulation) agenda. But tax cuts when the US budget deficit is 7% of GDP are riskier than they were in 2017 when the deficit was 3% of GDP. And tariffs are risky for growth and for the inflation outlook.