Recession risk and strategic asset allocation
MONTHLY MARKET COMMENTARY |
The continuing U.S. economic expansion is now the longest in U.S. history and estimates are for growth to continue for the near future. Yet headlines and data indicating a slowdown in global economic activity have understandably caused investor worry. Recent economic data shows a mixed picture. By all measures, the consumer (which represents more than two-thirds of the economy) is in good shape, supported by job growth, low unemployment and wage increases. At the same time, trade tensions have created a tenuous climate for many businesses globally. This is most evident in increasingly weak measures of business investment and manufacturing activity, notably in Europe. While not calling for a downturn near term, RSM’s Chief Economist, Joe Brusuelas, believes that economic growth is clearly running out of steam and that “slipping into 1% growth sets the stage for one of those economic or geopolitical events to push the global economy into a full-blown recession.”
Despite increased prospects for economic slowdown, we continue to advocate that clients adhere to their risk-appropriate long-term strategic asset allocation rather than attempt to time market exit and entry based on economic forecasts.