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Digging In: A Rise in Uncertainty Prompts Lower Non-U.S. Allocation

Given the momentum that has gathered recently regarding global trade uncertainty coupled with our view that the U.S. is further breaking away from the rest of world in terms of growth levels, monetary policy flexibility and potential future economic catalysts, the Investment Strategy Committee has downgraded our positioning in non-U.S. developed market equity and emerging market (EM) equity.  

We have lowered each exposure by around 2%, which further underweights non-U.S. developed markets and moves EMs to a slight underweight from a slight overweight across our CIO strategies. We believe, however, that EMs have solid long-term growth prospects driven by their consumers. 

We also believe that the Federal Reserve has more policy flexibility relative to non-U.S. central banks which would likely reverse some of the recent risk-off pull-back in U.S. equities. We are, therefore, allocating half the downward adjustment (2% of the 4%) to U.S. large capitalization equities and the remainder moves to cash.

Overall, we remain favorable on equities but would be patient in the coming weeks and let the market settle down before considering additions to your overall exposure.

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