Macro & Market Outlook

• Global Acceleration: Despite a slowing US economy, global growth is expected to accelerate into 2026 driven by central bank easing and real wage gains.
• Fed Pivot: The US Federal Reserve is likely to cut rates by 125bps over the next 12 months, starting at its September meeting. Over 40 central banks have already eased in 2025.
• Inflation Risk: Inflation is no longer trending down; money supply is rising, and some central banks are near the end of their easing cycles.
• Geopolitical Concerns: Persistent tensions (Ukraine, Gaza, Iran, trade) and policy uncertainty in the US continue to pose macro risks.

Asset Allocation Shifts

• Risk Moderation: After strong gains, Invesco is cutting high yield to Underweight and raising cash to Neutral to reduce overall portfolio risk.
• Still Pro-Risk Tilt: Despite moderation, the firm remains tilted toward riskier assets such as:
• Bank loans (Overweight)
• Commodities (Maximum)
• REITs (Overweight, especially Europe and Japan)
• Non-US equities, particularly China and Europe

Valuations & Preferences

• Attractive Assets:
• Industrial commodities and energy: Still priced near historical norms, positioned to benefit from global growth.
• Eurozone and EM bonds: Offer better relative value compared to US bonds.
• Japanese yen (JPY): Undervalued and poised to strengthen as interest differentials compress
• Overvalued Assets:
• Gold and Bitcoin: Considered expensive in real terms.
• US equities: Seen as overpriced and carrying concentration risk

12-Month & Long-Term Projections

• Top expected performers over next year:
• Commodities
• Bank loans
• REITs
• US dollar is expected to weaken, particularly against the Japanese yen
• US equities projected to underperform due to stretched valuations and economic slowdown.
• 10-Year Outlook:
• Highest expected returns: Bank loans, commodities, REITs
• Lowest or negative: Gold, US equities, cash in certain currencies
• Optimal portfolios favor bank loans and HY debt, while equities and gold are often underweighted