Globally, secular trends continue to point to soft growth for the foreseeable future while policy rates will likely remain at record lows or move even lower. The cyclical economic backdrop remains fragile. While many key manufacturing indicators have stabilized, they have done so at levels consistent with contracting output growth. Additionally, debt, demographics, sluggish productivity growth, populism and geopolitics continue to cast long shadows over the investment landscape.

What could change over the course of 2020 to impact growth outcomes? We continue to monitor the extent to which populism and geopolitics will weigh on growth as well as the effectiveness of monetary policy. Then there’s fiscal policy: while current plans continue to look unambitious, a more radical move in this direction seems inevitable.

The current environment has important implications for the way investors shape their portfolios. In equities, volatility and mixed valuations call for a focus on profitability, quality and strong cash flows. In fixed income, investors should look for efficiency: using high yield to de-risk some of their equity exposure and considering a credit barbell for income and limiting downside risk.