The trade war truce was welcome, yet we believe macro risks remain elevated despite largely accommodative global monetary policy. The backdrop is an already low interest rate environment and, arguably, increased borrowing has fed less into productive investment, and more into propping up risk assets. Additional debt is driving smaller incremental gains in GDP, while equities appear to be supported more by expanding multiples than expanding earnings. These uncertainties are hard to factor into forecasts at this point, but we believe it appropriate to recognise higher risks in valuations. As a result, we reassess our recommendations, and downgrade our views on 5 stocks.
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