Market GPS: Investors Should Expect the Unexpected in 2020

Head of Global Asset Allocation Ash Alankar discusses how 2020 may see a reversal of recent market trends, potentially leading to non-U.S. equities outperforming and persistently low inflation finally increasing.

Key Takeaways

  • Signals based on options prices hint at a reversal in the recent dominance of U.S. stocks as the relative attractiveness of emerging market, Asian and even European equities has risen.
  • Investors may be at risk of overestimating the potential diversification benefits of a stock and bond portfolio as, over the long term, these two asset classes have a higher correlation than many realize.
  • With a growing U.S. economy, strong labor market and still-accommodative financial conditions, inflation may reemerge as a force to be reckoned with. If it does, it will become a factor in deteriorating the diversification benefits between stocks and bonds.