• Global economic activity may be reaching peak levels, but the synchronized global expansion continues to provide a supportive backdrop for international equities.
• Recession risks in the U.S. remain low, and the traditional business-cycle playbook recommends favoring international equities even when the U.S. fully transitions to the late cycle.
• We believe there are upside risks to global inflation that will likely translate into greater market volatility, and potentially boost foreign currencies.
• Because commodities now represent a smaller percentage of the emerging-markets universe, emerging-market equities may not benefit as much from the typical inflationary pressures and rising commodity prices seen historically when the U.S. has drifted into the late cycle.
• Overall, we remain constructive on international equities on a cyclical basis, with smaller portfolio tilts and exposure to inflation-resistant assets warranted at this juncture of the business cycle
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