Market Cycle Guidebook - May 2025
The monthly Market Cycle Guidebook is a key resource for investors — providing insight into the stage of the business cycle, monetary policy trends, leading indicators, earnings momentum, valuations across multiple different assets and markets, long-term return expectations, and tactical asset allocation views.
Key Findings from the Latest Monthly pack:
Global monetary policy settings are shifting from headwind to increasing tailwind as inflation falls and economic cycle data remain soft.
The big edge risks are recession + deflation on one edge vs reacceleration + inflation resurgence on the other edge.
The US faces heightened risk of recession given policy uncertainty and confidence shocks from the chaotic start to the year.
Meanwhile the rest of the world may well hold OK (Japan going strong, Europe and China turning up out of slowdown + stimulus).
This makes for a somewhat bifurcated outlook
Among the asset classes most at risk given valuations and the stage of the cycle are US tech stocks, US housing, US dollar, and US credit (spreads).
Areas which see superior upside risk/reward meanwhile include government bonds, commodities, emerging markets, and certain sectors on a tactical basis such as defensives, small caps, and frontier markets.
Rotation and Relative value are thus key themes along with smart diversification and risk management (diversify diversifiers, tactically upweight more attractively priced diversifiers).
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