“The hurdle for cutting is less than the hurdle for hiking,” he said.
And little inflation means, the report said, that U.S. stocks will continue to “deliver solid return with less risk.”
Northern Trust said one should overweight developed markets because of “positive U.S fundamentals. These include modest growth and stuckflation.” That, the report added, gives these regions low risks versus other equity regions.
High yield investments are also attractive. Slow growth, the report said, will be able to overcome trade and political uncertainty.
“Solid fundamentals—including manageable default rates---and constructive technicals, due to strong demand, will make high yields attractive moving forward,” according to the report.
The report also said that in general the best returns will be in non-U.S. developed markets, “particularly in Europe although with elevated risk.”
Northern Trust said inflation linked investments should be underweighted. And cash will once again get trashy.
Part of the prejudice is that, although the Fed recently said more rate cuts are on hold, Northern Trust expects two more rate cuts this year.
“We view cash as an asset class used primarily for meeting near-term liquidity needs, and remain underweight,” according to the report.
Increasing supply and demographics will make it a bad time for inflation linked investments, Northern Trust said. “We view cash as an asset class used primarily for meeting near term liquidity needs and remain underweight.”
Despite the overall good numbers, the moderate growth theme will play out, Northern Trust said, in a period of continuing trade tensions between the United States and China. And it said that, regardless of which party wins the presidency this year, it does not see those tensions lessening