Global House View
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Article Type
Insights
Topic
Macro
Published
April 11, 2025
Read time
5 mins
Authors
Tim Sterk
Frank Rybinski, CFA
Jacob Vijverberg, CFA
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Global House Views

All investments contain risk and may lose value. The above overview is intended to illustrate major themes for the identified period. No representation is being made that any particular account, product, or strategy will engage in any or all of the themes discussed. Our asset class overweights/underweights in our model portfolio as of March 31, 2025 on a 3-month horizon. Up/down arrows indicate a positive (∆) or negative (V) change in view since the prior quarterly global house view meeting. These views should not be construed as a recommended portfolio. This summary of our individual asset class views indicates strength of conviction and relative preferences across a broad-based range of assets but is independent of portfolio construction considerations.

 

Our asset allocation decisions - in short

 

Cross asset allocation: We have a small overweight toward fixed income versus equities in the cross-asset allocation. This position recognizes the volatile, risk-off market environment, especially since the Trump Administration announced its global import tariffs on April 2. Additionally, a fixed income versus cash position has been implemented, mostly on the back of the global rate-cutting cycle by both the Fed and the ECB, which would result in cash investments yielding less over time. Meanwhile, longer-duration bonds would benefit due to the inverse price-yield relationship.

 

Within fixed income: Within fixed income, we are overweight government bonds due to the significant market-off sentiment post “Liberation Day.” Moreover, the Fed and the ECB are in the process of cutting rates. Both the expected magnitude and the velocity of these rate-cuts have increased after the introduction of the Trump tariffs and reflects market participants’ expectations that central bankers will step in to prevent or soften the tariffs’ potential negative impact on the macroeconomy. Additionally, investment grade credits in both the US and the EU are underweighted in the portfolio. Although spreads have widened during the past week, those levels are still not considered to be “recessionary” and have significant potential to widen further amid additional geopolitical and trade unrest.

 

Within equities: Within the equity model portfolio, a neutral position is present. Global equity markets have sold off in the wake of the US tariffs and the overall recessionary concerns. Consequently, it is difficult to decide within equities which markets might perform, relatively, better than others. On the other hand, real estate investment trusts are expected to benefit from the potentially lower interest rates due to the dampening effect those have on borrowing costs. However, the recent risk-off move has hit listed real estate hard, which is in line with the sell-off in global equity markets.

 

Within currencies: A continued US economic slowdown and weaker data will likely put pressure on the US dollar. However, if the market prices the tariffs as permanent, expect those to ultimately prove to be a positive for the dollar. The combination of higher core euro yields and a stronger medium-term growth backdrop implies that global investors and corporates will allocate more to euro-based assets and investments than they have in the recent past, which would benefit the euro. For the British pound, inflation persistence risks are likely to dominate the Bank of England’s thinking and force it to stick with gradual and careful guidance, amid rising inflation and high uncertainty on the domestic or global front. The Japanese yen typically benefits during times of weaker global growth. In addition, strong Japanese inflation momentum would likely keep the Bank of Japan’s terminal rate pricing higher.

 

Market Commentary

 

On April 2, 2025, President Trump announced import tariffs on almost all of its global trading partners. Those tariffs consist of a combination of a base rate of 10% and a so-called reciprocal rate. While the introduction of these rates was not unexpected by the market, its overall magnitude was much higher than anticipated. In the days after “Liberation Day,” markets followed the traditional risk-off pattern: Equity markets declined steeply, while traditional safe-have assets—such as Treasuries, German Bunds and the Japanese yen, increased in value. Wall Street’s “fear index,” the CBOE Volatility Index (VIX), soared to a level of 60.

 

The Trump administration has since clarified that its imposed tariffs will remain in place despite the global stock market sell-off. “The President needs to reset global trade,“ Commerce Secretary Howard Lutnick said in an April 6 interview on CBS’s “Face the Nation.” The tariffs, in combination with the messaging from The White House, have resulted in the downward adjustment of many macroeconomic forecasts. In numerous instances, economists are pencilling in a US recession, driven by the direct inflationary impact on American consumers, as well as due to the overall hit to confidence.

 

The recent developments have also resulted in the markets pricing in faster and more significant rate cuts from the ECB. The Fed will likely be in a more difficult spot since it needs to make the trade-off between fighting inflation and supporting the economy.

 

While equities have experienced a sharp decline and credit spreads have widened since “Liberation Day,” those asset classes are still not relatively expensive from a historical valuation perspective. As a result, the global risk-off market move may continue in the coming days and weeks. A longer-term concern is also how dedicated the US administration will remain toward its unorthodox economic policies. 

Important Disclosures

Authors

Tim Sterk
Portfolio Manager
Tim Sterk, CFA, is a portfolio manager in the multi-asset group, where his main responsibilities include managing the firm’s asset allocation fund range and our alternative risk premia strategy. 
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Frank Rybinski, CFA
Head of Macro Strategy
Frank Rybinski, CFA, is head of macro strategy responsible for guiding the firm’s global macroeconomic view as it pertains to tactical and strategic asset allocation.
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Jacob Vijverberg, CFA
Head of Asset Allocation
Jacob Vijverberg, CFA, is head of asset allocation. He is responsible for both strategic and tactical asset allocation. The team is managing a wide range of multi-asset funds  
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