“We continue to see a risk-on economy for next year and our strategy is to go between the shield and the yield,” said Roland Kaloyan, a strategist at Societe Generale SA. “We like quality sectors with good visibility on earnings and strong balance sheets, and at the same time we’re looking at high-dividend yield sectors.”
It’s possible central bankers will forestall any slowdown. But the dovish market expectations helping drive the rally look extreme. Policy makers went on record to try to dial that back this week.
Financial conditions are already looser than at the time of any first rate cut in the past five cycles, according to Credit Suisse Group AG. Data, while softening, is by no means alarming and its been hampered by a trade war that could end fast.
“Long term there are some serious struggles out there with risk if the Fed does not deliver those three cuts that the market is looking for,” Jack Manley, JPMorgan Investment Management Global strategist, told Bloomberg TV.
Though based on current form, stocks and bonds could well defy that, too.
This article was provided by Bloomberg News.