We’re now 10 years into what has become the longest US economic expansion on record. Our Governed Portfolio default fund, launched in January 2009, has benefited from this, delivering growth-phase savers 10.6% a year since then1.
We don’t think the next recession is imminent and we’re moderately overweight stocks and high yield bonds in our funds.
Within this decade of growth, there have been three clear mini-cycles. 2012 saw fears of a financial crisis relapse and the potential collapse of the Euro; 2015 saw the devaluation of the Chinese currency and fears over Glencore; and in 2018 we had selloffs both in Q1 and at the end of the year on trade war concerns.
As long as inflation remains low, central banks are likely to ease policy and engineer a new upswing in global growth as they did on previous occasions. This process is already under way with the US Federal Reserve widely expected to start cutting interest rates again and the UK’s special Brexit situation making it an exception.
There may be volatility in the short term in this tug-of-war between stimulus and tariffs, but with Trump wanting to get elected again in 2020, markets look on balance favourable.
1 Royal London data, May 2019