As uncertainty revs up, global GDP is on track to rise 3% in 2019, the slowest pace in a decade.1 Global trade volumes fell in 2019 for the first time since the Great Recession, reflecting roller coaster U.S.-China trade negotiations, a lack of progress on Brexit, and political unrest in Hong Kong and some Latin American countries. Central bankers have responded with stimulus to keep the decade-long expansion going. While low interest rates and accommodative financial conditions will likely prolong the expansion, much will depend on geopolitical influences. We are monitoring these developments and have concluded that our Stagnation outlook for the U.S. economy over our forecast time horizon of twelve months still stands, with a recession likely in 2021.

China’s exports to economies involved in the regional supply chain have continued to grow as manufacturers increased shipments to the rest of Asia.  The December U.S. announcement of the Phase One trade deal has committed China to terms on increased intellectual property protection, limits on forced technology transfer, exchange rate transparency, further opening of the financial sector, and increased purchases of U.S. goods and services.2

European growth prospects have improved after several months of stagnating, with survey data improving across both the business and consumer space. In his last meeting as the ECB president, Mario Draghi held rates unchanged. In Germany, disruptive regulations, the global trade conflict, and weakness in global car sales have been blamed for the slump in German car production.3 Data continues to show that German carmakers continue to do well globally. The U.K. Conservative election victory suggests that the withdrawal agreement legislation will likely be passed, allowing for a stable Brexit transition to begin at the end of January.

Slowdowns in China, Germany, and South Korea as well as protests in Latin America, the Middle East, and Hong Kong may be helping U.S. economy to avoid a downturn by driving investment toward America’s relatively safe harbors. The FOMC left rates unchanged at the December meeting.4 The resilience of the U.S. consumer has helped offset challenges in the factory space, thanks to a solid job market that has bolstered confidence and spending. In early December, the Phase One trade deal between China and the U.S. and the revised NAFTA were announced.

Canada’s third quarter gross domestic product data delivered an expected slowdown, as a drop in exports and drawdown in business inventories masked a rebound in domestic demand.5 Strong economic growth earlier in the year has kept the Canadian dollar in its number one spot among major currencies in 2019, supported by some of the highest yields in the G-7 and by the BOC’s reluctance to ease policy like the Federal Reserve and European Central Bank.6

In November, the S&P 500 was up 3.6%, its biggest monthly gain since June, while the S&P SmallCap 600 and the S&P MidCap 400 gained 3.1% and 3.0%, respectively. Canadian equities posted gains in November, with the S&P/TSX Composite up 3.6%. The S&P Europe 350 gained 2.8%, keeping it on track for its best year since 2009. The S&P United Kingdom joined the positive trend, gaining 1.8%, despite uncertainty caused by the pending general election. Trade optimism also helped lift Asian equities in November. U.S. fixed income performance was mixed, with leveraged loans as the top performer while Treasuries lagged. With the People’s Bank of China cutting rates in November, Pan-Asian yields ticked down and bond prices rose.

In December, we maintained the November allocation between Equities and Fixed Income across all models. Allocation to equities remains at 17% in Tactical Conservative, 22% in Tactical Moderate Growth, 36% in Tactical Growth, and 44% in Tactical Aggressive Growth. Within the Fixed Income allocation, we maintained the weight of the 7-10 year maturity in order to protect the portfolio from a rebound in long rates, as treasury yields have been declining and the yield curve is close to inverted. Gold continues to be present in all models as it performs well in high risk, low yield environments as a risk-free asset class.

We will continue to monitor the data for growth, inflation, and recession signals from employment, consumer spending, business sentiment, Fed policy, the yield curve, inflation, and global economics. Our focus is on protecting portfolios from downside risk, and we believe that our investment process is working to achieve that goal.


Deborah Frame , President and CIO


International Monetary Fund. World Economic Outlook. October 2019. Why China Isn’t Celebrating the Phase One Trade Deal. December 18, 2019.

Trading Economics. Germany Car Production. November 2019.

Trading Economics. U.S. Fed Funds Rate. December 11, 2019.

Trading Economics. Canada GDP Growth. November 29, 2019.

Trading Economics. Canadian Dollar. November 30, 2019.


Index return data from Bloomberg and S&P Dow Jones Indices Index Dashboard: U.S., Canada, Europe, Asia, Fixed Income. November 30, 2019. Index performance is based on total returns and expressed in the local currency of the index.