As we entered 2019, our bullish thesis was largely based on an economic slowdown that would cause the Fed to shift gears toward a much more accommodative monetary policy as the year progressed. In our view, the sharp market drop late last year and weak global economy since has largely been due to the lagged effects of tighter monetary policy with the U.S./China Trade War helping accelerate the global slowdown. As highlighted in our October Macro Slide Deck, the combined effect of 1) multiple FOMC rate cuts; 2) a sharp drop in both U.S. Treasury (UST) and Corporate Bond yields; 3) stabilization of global manufacturing data; and 4) a demographic tailwind should stabilize growth and lead to a better economic and EPS outlook heading into 2020.
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