- Stock buybacks, vast sums raised by private equity investing, and robust corporate M&A activity could all lend support to equities.
- The current trade conflict, particularly U.S. tariffs aimed at China, have the potential to disrupt global financial markets.
- As active managers faced with higher volatility, we are on alert for attractive stock-specific opportunities that may emerge.
In contrast to a year ago, when global markets were enjoying historically low volatility and record highs, investors today are dealing with more challenging conditions. At the midpoint of 2018, markets have advanced only slightly while volatility has increased and investors are less willing to shrug off risks. Following an acceleration in global economic growth last year, we are now seeing slightly less robust growth in Europe, slowing in China, and heightened concern about global trade. In the United States, growth remains strong, due in large part to the Tax Cuts and Jobs Act.
Looking ahead, we believe equities can advance, but they may do so in fits and starts due to inflationary cost pressures and concerns that we are nearing the end of this growth cycle. We believe the likelihood of recession over the next 12 months is fairly low, but we are cautious about emerging markets, particularly those that are vulnerable to central bank tightening due to high levels of debt.
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