The title for our 100th edition of the Global Outlook and Strategy publication is Passing the Baton. We have chosen this title to reflect the stage that we are at in investment markets following three calendar years of solid returns. Looking forward it will be important to recognise that future returns may be harder to achieve, reinforcing the need for broad diversification. This requires that investment portfolios are well diversified by geography and asset class and positioned in appropriately priced asset classes. With a sharp eye on valuations, we have taken the view that it is an opportune time to focus investments on more reasonably priced equity markets (including Emerging Markets and Japan) and reducing our exposure to the US equity market. To some extent we are drawing a partial line under the period of US exceptionalism that has been experienced in markets, especially in a market clouded with geopolitics. At the same time, we continue to recognise the macroeconomic environment remains supportive due to relatively full employment, supportive government spending, positive economic and earnings growth, and monetary policy moving back (through easing) from a tight stance in most economies.
