“Higher volatility alongside unreliable stock/bond correlation demands that investors think critically about diversification,” said Gargi Pal Chaudhuri, Chief Investment and Portfolio Strategist.
As for the trajectory for the US economy, BlackRock highlights the resilience shown in some metrics including durable goods, retail sales, factory orders, non-farm payrolls, and corporate earnings; but also, the softer consumer sentiment reflected in several surveys and indexes which leaves open the potential for recession.
For Canada, there has also been a weakening of consumer and business sentiment while inflation has eased. But the new government may increase stimulus measures such as boosting infrastructure spending that should ease growth risks.
Canadian equites will continue to be impacted by headlines in the near term while US equities remain exposed to tariff risks, although are expected to see a broadening out of returns rather than being focused only on the top of the index. International equities have outperformed North American options recently and the report suggests that they will continue to deliver for investors seeking lower valuations and increased diversification.
Meanwhile, in fixed income, an active, flexible approach may work best for investors amid an uncertain trajectory for interest rates as the BoC navigates the impacts of tariffs.
