Is it that simple? Global equity investing is all about missing the big macro risks – recessions. There are headline risks every year, but it is always about economic growth when you step-back and look at annual performance. If global growth appreciably slows, global stocks are hurt. A simple long-only asset allocation strategy is to stick with long-term trends with the ability to walk-away when a recession or slowdown occurs.
We don’t believe that calling growth slowdowns is easy. Forecasters have done a poor job over the last few decades, but the key investment point is that there should be clarity on where there needs to be focus. There is a significant amount of news, but the growth story is all that matters. Global slowdowns do not occur often. There were nine negative years out of our sample of 30. There will be local recessions and negative country events; nevertheless, it is the global growth cycle that matters.