Late-cycle macro risks and asset allocation

June 3, 2019


Part of Vanguard's Global Macro Matters research series

To promote better understanding, researchers from Vanguard Investment Strategy Group examine the economic trends that affect the investing environment in a continuing series. Below are their latest insights into Global Macro Matters.

As the U.S. economy enters the later stages of its current expansion, returns are projected to be more modest than in previous late-cycle periods. Tailoring a portfolio to this environment can enhance risk and return characteristics, but it can also expose your clients to suboptimal portfolios if scenarios develop differently than expected.

This piece examines three pressing risks that may affect asset allocation decisions:

  • The uncertainty surrounding the path of monetary policy in the United States.
  • The instability of the Chinese economy.
  • The direction of the euro area's growth trajectory.

To learn about the factors affecting the likelihood of recession, read Known unknowns: Uncertainty, volatility, and the odds of recession.


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