Fidelity's Asset Allocation Research Team (AART) examines major themes in global financial markets and presents its investment outlook in this quarterly market update.
During Q1, global growth remained positive but increasingly uneven, and many major economies have progressed toward more advanced stages of the business cycle; the U.S. is firmly in late cycle but with low near-term risk of recession.
Despite the heightened uncertainty, global assets responded favorably to the U.S. Federal Reserve's shift away from its monetary tightening bias; U.S. equity markets led the way.
Globally, government bond yields continued to decline; 10-year Treasury yields fell below 3-month Treasury yields, inverting the U.S. yield curve.
Although we think global economic momentum has peaked, recent changes in policy stances in the U.S. and China are supportive of asset markets and of the business cycle overall.
The mature global business cycle continues to warrant smaller cyclical allocation tilts and the prioritization of portfolio diversification; risks include monetary and trade policy uncertainty, as well as China's uncertain outlook and policy response.