Global growth is projected to reach 2.5% in 20201. Reduced trade uncertainty combined with last year’s easing in financial conditions helped business sentiment stabilize in many major economies. The U.S. dollar benefitted from safe-haven demand over the past year amid this trade uncertainty. Global manufacturing activity generally remains soft; the global manufacturing PMI fell to 50.1 in December, consistent with stagnation.2 Trade challenges between the world’s two largest economies are likely to continue, with no long-term deal to tackle structural issues and imbalances between the U.S. and China. Growth forecasts for advanced and developing economies have been revised down as a result of weaker than expected trade and manufacturing activity. 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.

GDP growth in China has slowed to 6% in the third quarter of 2019, its slowest pace in about 30 years.3 Policymakers are focused on measures to limit risks arising from excessive debt burdens, even if it means weaker rates of growth. An uptick in infrastructure projects towards the end of last year has been the main driver of growth. Eurozone growth continues to underperform, dampened by the gradual slowdown in China, the ongoing Brexit saga, White House protectionism, and the threat of more tariffs. The accommodative policy measures implemented by the ECB and fiscal policy should continue to prop up the economy. Concern grows about the corrosive side effects of negative interest rates as the ECB’s bond-buying program nears its self-imposed limits.

The U.S. leads the global charge as their economy is entering its eleventh year of expansion, the longest on record. The consumer remains the main source of strength due to strong job gains and low interest rates that have bolstered spending. While the U.S. has proven successful in securing a trade deal with Canada and Mexico and extracting a “phase one” trade agreement with China, vulnerabilities remain due to their sizeable trade deficit. As a share of GDP, the U.S.’s goods trade deficit over the last two years has narrowed only marginally below the last decade average, driven mainly by a slight reduction in U.S. import demand, where lower merchandise imports from China have been replaced by imports from Mexico, Europe, and developing countries in Asia.4 The PMI for the sector hit its lowest level in a decade in December.5 Conflicts in Iraq and Afghanistan have left the American public strongly opposed to further major conflicts in the Middle East and a direct conflict with Iran would raise downside risks to business activity. For Canada, healthy demand stateside and receding North American (USMCA) trade tensions helped facilitate the much-needed rotation towards exports and business investment from the consumer and housing sector in the fourth quarter.

One of the most notable effects of last year’s Fed rate cuts was support for asset prices. U.S. equities ended 2019 strongly with the S&P 500 up 31.5% for the year, despite lackluster profits, slowing global growth, and recession fears. It is worth noting that a late-2018 selloff provided a flattering comparison for 2019. Mega-caps dominated as gains for the S&P MidCap 400 and the S&P SmallCap 600 were 26.2% and 22.8% for the year, and 2.8% and 3.0% for December, respectively, while the S&P 500 was up 3.0% for the month. U.S. fixed income performance was positive across the board. The S&P/TSX Composite gained 22.9% during 2019 and was up 0.5% in December, closing out the decade with its best annual performance since 2009. European equities also experienced their best year since 2009 with S&P Europe 350 up 27.2% for the year and 2.1% for December. The S&P United Kingdom finished 2019 up 17.2% for the year. Commodities also rallied, with the DJCI up 10.1% and the S&P GSCI up 17.6% for the year, driven by gains in Energy and Precious Metals.

In January we maintained the December 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. Gold continues to be present in all models as it performs well in high risk, low yield environments as a risk-free asset class.

The trend towards populism and protectionist policy remains a risk to the stability of global financial markets while heightened geopolitical strains also have the potential to create volatility. 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


The World Bank Group. Flagship Report. Global Economic Prospects. January 2020.

2 J.P. Morgan Global Manufacturing PMI. News Release. January 2, 2020

Trading Economics. China GDP. January 20, 2020.

Trading Economics. U.S. Goods Trade Deficit. November 26, 2019.

Trading Economics. U.S. PMI. January 2020.


Index return data from Bloomberg and S&P Dow Jones Indices Index Dashboard: U.S., Canada, Europe, Asia, Fixed Income. December 31, 2019. Index performance is based on total returns and expressed in the local currency of the index.