Rhythmic Reasoning_Full Report_Final_EN - Flipbook - Page 47
RHYTHMIC REASONING | TEMPO, TIMING AND TUNING
G LO B A L A S S E T A L LO C AT I O N
Warren Hastings
Jorge Gutierrez Tostado
Managing Director, Investment
Strategy, Canada
Managing Director of
Investment Strategy, Mexico
Rene Eduardo Peragallo
Lizana
Managing Director Investment
Strategy, Global Wealth
Management
Walid Khalid
Director, Investment Strategy
KEY CONCLUSIONS
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•
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UW = underweight, N = neutral, OW = overweight Positioning represents current
tactical asset allocation mix relative to strategic asset allocation
Market volatility has eased as trade policy uncertainty has
receded from peak levels. However, volatility could ramp up
as negotiations with key trading partners like China remain
ongoing, in addition to the 2026 USMCA negotiations.
Equity valuations are stretched relative to history but
earnings momentum may provide a cushion as estimates
remain healthy.
Quality and selectivity are key. A focus on high-quality
companies with pricing power, while being mindful of
concentration risks or cyclical areas of the market is prudent.
Fixed income can serve as a ballast in portfolios. Sovereign
and investment-grade corporate debt offer healthy yields
and protection, while high-yield appears richly valued amid
tight spreads and higher default risk.
MARKET VOLATILITY HAS SUBSIDED AS THE MAJOR ECONOMIC
RISKS HAVE RECEDED
After reeling from tariff-related headlines in the first few months of
the year and rebounding into positive territory after the Liberation
Day tariff pause, global equity markets have notched record highs.
The improved sentiment has been driven by better – but not great
– news on the trade policy front as tariff rates are not as high as
previously feared. Japan and the European Union, for instance, will
face 15% tariffs, numbers that are well above the pre-Trump era
but lower than what was previously floated by the administration.
The U.K. “enjoys” an even lower 10% tariff rate, while Canada and
Mexico, despite facing materially higher rates of 35% and 25%,
respectively, have USMCA-compliant goods exempted from tariffs,
leaving each with some of the lowest tariff rates on a weighted
basis.
Source: Scotia Wealth Management, Bloomberg Finance LP
Economic conditions have also been solid with consensus yearahead recession probabilities across the major economies being
relatively low (Fig. 1). Central banks, with the exception of the BoJ,
Expected returns shown are 10-year annualized. Historical returns and volatility
are based on 20 years of data. | Volatility is measured as annualized standard
deviation of returns. | All historical returns shown are in USD terms | Fixed income
historical returns and volatility are premised on USD-hedged indices.
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