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      Asset Allocation Committee Outlook 3Q2018

      Disconnect and Reconnect

      Webinar | Asset Allocation Committee Outlook: Disconnect and Reconnect
      Join us for a discussion with Erik Knutzen, CIO of Multi-Asset Class and Gorky Urquieta, Global Co-Head of Emerging Markets Debt who will address the Asset Allocation Committee’s latest views on how to navigate the current market environment. Listen to Replay

      “We believe that the rest of the world will reconnect with U.S. growth as the year matures, but in the near term we are cautious on directional market risks. Instead, the AAC is seeking nuanced, idiosyncratic ways to stay connected with that conviction while mitigating potential downside risk. We are finding the current environment rich in those opportunities.”

      ~ Erik L. Knutzen, CFA, CAIA, Chief Investment Officer—Multi-Asset Class

      Download our 12-month Outlook


      The market volatility that struck in the first quarter has persisted into the summer. Now it is joined by a heightened feeling of disconnect in regional economic growth rates, in geopolitics, in global trade, and in the relationships between some market prices and their underlying fundamentals. The Asset Allocation Committee (“AAC” or the “Committee”) maintains that global growth can get back on track and the business cycle can extend into 2019 and beyond but acknowledges that, before this reconnect, the current disconnects are a source of considerable short-term uncertainty. To reflect this, the Committee has become more neutral in its views on relative market risks as it seeks clarity on the path of growth and interest rates into 2019, as well as near-term trade frictions and election risks. The AAC is maintaining exposure to emerging and inflation-sensitive markets, while increasing focus on idiosyncratic opportunities with alternative strategies, and by exploiting some of those disconnects in market pricing.


      When U.S. President Donald Trump left the June G7 meeting early, and then rejected its joint communique backing a “rules-based trading system,” he distilled the heightened feeling of disconnect that gripped the second quarter of 2018. Allies and trading partners feel disconnected from one another. European and Japanese Purchasing Managers’ Indices continue to disconnect from the more confident readings out of the U.S., breaking the synchronized global growth of 2017. Emerging economies have disconnected as fragility arose in Argentina and Turkey as the U.S. dollar strengthened, despite the fact that other developing economies continue to demonstrate strong mid-cycle fundamentals. This has all added to the market volatility that resurfaced in February this year—causing some investors to disconnect from their risk exposures.

      The AAC understands the turn in sentiment but still thinks it is too early to adopt an outright defensive or risk-averse stance.

      Markets need to build trust in the current U.S. administration’s competence on trade. Until they do, the aggressive and unorthodox approach will be a source of volatility. But while the AAC regards the risks as substantial, it is reassured by the clear incentives the main players have to avoid a truly damaging outcome (see “Up for Debate: The First Shots in a Trade War?” below).

      We acknowledge the disconnect between economic growth and confidence in the U.S. and elsewhere, but we would also point to the fact that activity in Europe, in particular, has pulled back from unsustainably high levels. The AAC does not see any signs of a structural growth shock and therefore anticipates a gradual reconnect in the regional economic data in the second half of the year.

      Economic data weakness has been concentrated in Europe Purchasing Managers’ Index levels
      Source: Bloomberg, Markit.

      That has implications for volatility in rates, fixed income and currencies. For more than two years, the biggest market mover has been the U.S. Federal Reserve. Now, however, if our central scenario of a return to smoother global economic growth into 2019 turns out to be correct, the forward path of Fed rates and balance-sheet reduction is as clear as it has been for a very long time. It is time for the European Central Bank (ECB) to take the lead. While it has undertaken to hold interest rates until next summer, as conditions evolve that could add to the uncertainty about how fast it will need to move when it is time to hike.

      Markets anticipate a handover from Fed tightening to ECB tightening Terminal policy rate pricing in the U.S. and the euro zone
      Source: Bloomberg. Based on Overnight Index Swaps. Data as of June 19, 2018.

      In that scenario, the U.S. dollar is beginning to look overstretched. This year it has been subject to a battle between the downward pressure of the U.S.’s twin deficit and the upward pressure of the U.S.’s relatively high yields, with the yield differential winning out. Recent risk aversion has pushed it up still higher. In the absence of a serious negative shock, however, the shift of the market’s attention from Fed tightening to ECB tightening could start to bring the dollar back into a narrower trading channel. Should the dollar retreat a little from its current heights, it follows that much of the recent negative sentiment around emerging markets could dissipate (see “Up for Debate: Emerging Markets—Opportunity or Warning?” below).

      U.S. dollar subject to opposing forces Interest rate differentials have been pulling EURUSD lowerCurrent account balances imply EURUSD could be higher
      Source: Bloomberg.

      This remains the AAC’s central expected scenario, but there is no denying that the degree of certainty around that scenario is lower at the end of the second quarter than it was at the end of the first.

      “Right now we are waiting for more clarity on U.S. earnings growth for 2019 and a recovery in the economic data out of Europe,” as Joe Amato put it. “We know that the effect of the U.S. tax cuts will likely begin to fade toward the end of the year, and Europe’s data is getting worse in the short term, not better. Reassurance on those issues will enable us to withstand higher interest rates and extend the business cycle. In the meantime, market beta will be the tip of the spear of uncertainty, so we favor exposure but also see the need to manage our risk budget.”


      How does this translate into changes to the AAC’s asset class views?

      Although we identify some interesting opportunities in short duration credit, as described below, the Committee maintained an underweight view on investment grade fixed income overall. With Treasury rates likely to be rising, it will generally fail to provide diversification when sentiment turns against equity risk.

      The view on global equity remains slightly overweight but has turned more neutral overall, as the AAC is more positive on U.S. markets and less positive on non-U.S. markets than it was at the end of the first quarter.

      On this occasion, however, our headline asset-class views conceal many nuances. In developed non-U.S. markets, for example, the view on Europe has been downgraded on uncertain fundamentals and full valuations, while the view on Japan has been upgraded to reflect the weaker yen and the evidence that inflationary “Abenomics” is gaining enough traction to offset some of the uncertainty around global trade. We also remain overweight in our view on emerging markets equity, given our outlook for a “reconnect” in global growth and a dollar retrenchment.

      Similarly, while the AAC is more neutral on equity, it maintains its overweight view on private equity and now views both hedge fund styles, low-volatility and directional, as an overweight.

      In private markets we acknowledge that there are aggressively leveraged and valued deals being transacted, but our view reflects a preference for more opportunistic, niche strategies focused on high-quality and growth investments that are not easily replicated in the public markets. It is also worth reiterating that the view applies to commitments made today that will find their way into investments over the coming two to three years: vintages raised near market peaks have tended to outperform because they were investing as the euphoria cooled off.

      In hedge funds, as well the low-volatility strategies that work in specific niches or implement market-neutral trades, the AAC now has an overweight view on directional strategies. Long-short equity and credit managers have been benefitting from rising dispersion in the performance of individual names, and they now enjoy a decent return on the cash they hold while they are short stocks. Trend-following strategies have started to pick up on genuine momentum in specific markets. While directional, these strategies need not be highly correlated with overall market risk.

      For some time now, the AAC has sought out reasonably priced ways to mitigate against rising inflation, and has generally favored inflation-indexed bonds and commodities. Its overweight view on Treasury Inflation Protected Securities (TIPS) remains in place, given its expectation for another 40 basis points or more on the rate of inflation before the cycle peak. While we still recognize their role as a hedge against inflation in the later part of the cycle, our view on commodities has been downgraded based on our expectations for oil supply, and on vulnerability to the forces of uncertainty we have already described: the stronger dollar, weaker growth outside the U.S. and tough talk on trade. By contrast, the AAC has upgraded listed real estate, with its inflation-indexed rental income, as confidence grows that the asset class has suffered the worst of the sell-off it typically endures at the start of a rising-rates cycle.

      Has listed real estate seen the worst of its interest rate-related sell-off?FTSE Nareit All REITs Index
      Source: FactSet.

      Finally, perhaps the AAC’s most nuanced view is to be found across the fixed income asset classes. The investment grade view remains underweight and the view on high yield is upgraded to neutral, while emerging markets debt is maintained as an overweight with a preference for hard-currency over local-currency bonds. What links these views is the attractive opportunity we see in short-duration bonds in all three markets.

      After a rise in short rates that has flattened yield and credit curves, the AAC sees relative value at the front end even in investment grade—a longstanding underweight. For U.S. investors, an additional lift of approximately three percentage points per annum is available from European credit simply by hedging the exposure back to dollars, given the unusually wide rate differentials between the two currencies.

      This relative value at the short end of the curve is clearer still in high yield and emerging markets. At the end of June, the Bank of America Merrill Lynch U.S. 1-5 Year High Yield Constrained Index was yielding just seven basis points less than the full index. This is attractive value for investors seeking good-quality, lower-volatility credits with minimal interest-rate sensitivity and limited supply, particularly relative to the somewhat overheated loan market where covenants are deteriorating. In emerging markets, the one- to three-year bonds in the hard-currency JPMorgan EMBI Global Diversified Index were actually yielding 31 basis points more than the full index.

      Short duration exhibits relatively high yields, especially in high yield and emerging markets hard currency bondsYield to worst and duration for short duration and full indexes
      Source: JPMorgan, Bloomberg Barclays, Bank of America Merrill Lynch. Index Definitions (Full Index, Short Duration Index): Investment Grade Credit: Bloomberg Barclays U.S. Credit Index, Bloomberg Barclays U.S. 1-5 Yr Credit Index; U.S. High Yield: BofA ML US High Yield Constrained Index, BofA ML US 1-5 Yr US High Yield Constrained Index; Hard Currency EMD: JPM EMBI Global Diversified Index, JPM EMBI Global Diversified 1-3 Yr Maturity Index; Local Currency EMD: JPM GBI-EM Diversified Index, JPM GBI-EM Diversified 1-3 Yr Maturity Index; Corporate EMD: JPM CEMBI Diversified Index, JPM CEMBI Diversified 1-3Yr Maturity Index. Effective Duration shown for Investment Grade Credit and U.S. High Yield; Duration to Worst shown for EMD Indices. Data as of June 30, 2018.

      “We are cautious on rates, but at short durations you can build an investment grade portfolio, add a dash of high-quality high yield and emerging markets debt and come out with around a 4.5% yield,” commented Ashok Bhatia. “We think that’s a good place to be at the moment.”

      Experience tells us that summer, with its abandoned trading desks and sometimes gappy pricing, is often not a good time to get caught on the wrong side of the market. That goes double when there is as much uncertainty around as there is today. The AAC’s upgraded view for U.S. assets reflects a recognition that nervous investors tend to head there for safety, but it also brings our overall view on regional market exposures toward neutral. We believe that the rest of the world will reconnect with U.S. growth as the year matures, but it remains too early to express that conviction with clear views on market risks. Instead, the AAC is seeking nuanced, idiosyncratic ways to stay connected with that conviction while mitigating potential downside risk. We are finding the current environment rich in those opportunities.

      Fixed Income Market Views*

      The AAC raised its view on high yield from underweight to neutral, but identified short duration as an area of particular opportunity.

      Global Fixed Income

      U.S. Government/Agency: The Asset Allocation Committee (“AAC” or the “Committee”) maintained an underweight view. The Federal Reserve increased rates in June for the second time this year as unemployment dipped to 3.8% and annual growth in Core Personal Consumption Expenditures (CPE) climbed towards the Fed’s target of 2%. Fed officials have penciled in two more hikes this year and will continue reducing the central bank’s balance sheet. The Fed expects three rate increases in 2019 and one in 2020. High and increasing U.S. dollar hedging costs could reduce the relative attractiveness of U.S. investment grade securities. The Committee maintained its overweight view for U.S. Treasury Inflation Protected Securities (TIPS), as inflation risk remains skewed to the upside.

      U.S. 10-year breakeven inflation has consolidated above 2%
      Source: FactSet.

      U.S. Municipal Bonds: The Committee reduced its view from neutral to underweight. Municipals benefited from a supply decline in 2018 as certain tax-exempt bonds were disallowed after 2017, but the greater part of that opportunity now appears to have passed.

      Developed Market Non-U.S. Debt: The Committee maintained an underweight view. While the European Central Bank (ECB) reduced its pace of monthly bond purchases again, it has also signaled that it will be accommodative on the back of recent weakness in the region’s economy, with rate hikes unlikely until September 2019. Nonetheless, the AAC has concerns around valuations in European bond markets. The Bank of Japan (BoJ) continues on its yield targeting strategy, holding yields down on the long end of the curve. Soft inflation data has driven the BOJ to continue maintaining its easing path.

      High Yield Fixed Income: The Committee voted to raise its view from underweight to neutral, identifying short duration high yield as an area of particular opportunity, given healthy credit spreads and rising rates, especially relative to bank loans. Deterioration of and outflows from the telecom sector could pose risks.

      Emerging Markets Debt: The Committee maintained an overweight view. Despite recent volatility as a result of a sharp rise in the U.S. dollar and rising tensions in the EU and on global trade, emerging markets debt could stand to benefit from the improved growth in Europe that the AAC anticipates, and a reduction in political risk. Intermediate and long-term fundamentals remain strong.

      Equity Market Views*

      The AAC upgraded its view on Japanese equity as the yen is weakening and evidence is growing that “Abenomics” is gaining traction.

      U.S. Equities

      The Committee upgraded its underweight view to neutral for U.S. large cap and maintained its neutral view for U.S. small and mid cap. The U.S has maintained strong economic growth despite weaker trends in Europe and China, and strong corporate earnings are expected on the back of tax reform. Large cap valuations have come down from cycle highs due to both recent volatility and an increase in earnings estimates. Risks to the view include rising geo-political and trade tensions; a central-bank policy mistake that makes markets more sensitive to the removal of liquidity; and rising political risks due to Robert Mueller’s investigation and forthcoming mid-term elections. Small and mid-cap companies stand to benefit more from tax reform and deregulation; they also have less exposure to international trade and benefit from a stronger dollar and continued U.S economic strength because they generate a larger portion of sales domestically.


      The Committee maintained its overweight view. The Federal Energy Regulatory Commission (FERC) proposed restricting MLP interstate natural gas and oil pipelines from taking certain income tax allowances. Despite the sell-off on the news of the proposal, only a small number of MLPs are likely to be impacted. Recent pressure on the asset class has driven valuations lower, but depressed valuations and strong underlying business fundamentals could potentially provide an opportunity for MLPs to recover. MLPs have economic drivers (long-term contracts, take-or-pay contracts, fee-based assets) that can potentially provide a hedge against inflation. The asset class currently provides an attractive yield relative to fixed income and other dividend yielding assets such as REITs and utilities, and consolidation in the sector could increase efficiency.

      Public Real Estate

      The Committee voted to upgrade its underweight view to neutral in light of relatively attractive valuations, which have come about because the asset class tends to remain out of favor in rising rate environments. REITS have often recovered strongly as the interest-rate cycle matures and rents adjust upward with inflation, and the sector could also benefit from stronger demand and tighter supply.

      Non-U.S. Developed Market Equities

      The Committee downgraded its overweight view to neutral. In Europe, Purchasing Managers’ Indexes (PMIs) turned sharply lower, possibly indicating weaker economic growth, but the ECB remains accommodative as it contemplates when to wind down its quantitative easing program. A weaker yen could boost corporate earnings in Japan, and the BoJ remains committed to propelling the economy forward and maintaining its yield targeting policy. In the near future, the BoJ may announce plans to wind down stimulus. In the U.K., Brexit negotiations continue, representing an additional source of uncertainty.

      European equity has lagged, especially for U.S. dollar investors Returns for the 12 months to June 2018 (%)
      Source: Bloomberg. Data as of June 27, 2018.
      Emerging Markets Equities

      The Committee maintained its overweight view. Balance sheet adjustments have taken place across many emerging market economies, making them less susceptible to the potential negative impact of any short-term U.S. dollar strength. Trade wars and China’s managed slowdown remain key risks, as well as any sign that synchronized global growth may be petering out, but the AAC’s central scenario of rising growth in the U.S. and stabilizing economic growth in Europe and Japan could benefit emerging market equities in the second half of the year. The Committee views the emerging markets sell-off as overdone and therefore a buying opportunity.

      Real and Alternative Asset Market Views*

      The AAC downgraded its view on commodities on concerns about over-supply and trade tensions, while still recognizing their role as an inflation hedge.


      The Committee downgraded its overweight view to neutral. Oil prices could decline as OPEC may increase production to compensate for supply shortages in Venezuela and Iran, while dampened growth in Europe, Japan and China as well as trade tensions raise concerns about demand. Commodities also tend to be negatively correlated with the dollar, which has strengthened. Still, commodities could act as a hedge against inflation, which the Committee expects to rise further.

      Hedge Funds

      The Committee maintained its overweight in lower-volatility hedge funds and upgraded its neutral view to overweight in directional hedged funds. Investors are looking for ballast against potential volatility. Correlations between stocks and bonds have tended to be positive in periods of higher economic growth and inflation, and reach highs toward the end of the business cycle. Diversification into uncorrelated, low-volatility hedge funds can provide a thoughtful approach to managing risk in periods of increased correlation. More dispersion is being seen across assets, as well as clearer trends in certain markets, creating both long and short alpha opportunities.

      Long-short equity has performed well, macro strategies still to catch up Returns for 12 months to June 2018 (%)
      Source: Bloomberg. Data as of June 27, 2018. HFR indexes.
      Private Equity

      The Committee maintained its overweight view. Despite elevated valuations, private equity and debt look attractive relative to publicly traded stocks and bonds, providing a likely illiquidity premium. The AAC notes that commitments made to vintages raised at or close to market peaks have tended to outperform over their full cycle due to the lag time before investments are made.


      USD: The AAC downgraded its overweight view to neutral. The currency appears overvalued based on purchasing power parity (PPP) metrics, short covering has come a long way, twin deficit fears and political instability are still apparent, and Federal Reserve tightening is largely priced in. Risks to the view include the fact that market participants are still modestly short, yield differentials remain supportive and U.S. economic data has been surprising on the upside as other economies have struggled to maintain momentum.

      Euro: The AAC maintained its underweight view. Economic data has worsened and the political situation in Italy is likely to be unstable for some time, and ECB policy is likely to remain accommodative as past euro strength is causing some loss of competitiveness. In addition, market participants remain long. Risks to the view include a more relaxed attitude to the growth outlook and policy normalization at the ECB, the euro zone’s large current account surplus, and the fact that the region is a beneficiary of global growth and forward-looking indicators still lend support to growth above trend for 2018.

      Yen: The AAC maintained its neutral view. Market participants are long after the yen posted the best returns of any major currency in the first half of the year, the BoJ’s yield curve policy exacerbates negative yield differentials, and the yen is always vulnerable to outflows should risk sentiment improve. On the other hand, growth is relatively good, the current account is in surplus, inflationary pressures are starting to build and indicators suggest the currency may be undervalued. There are tentative signs of BoJ preparing the market to reduce stimulus.

      GBP: The AAC upgraded its view to a slight overweight. Sterling is undervalued based on PPP measures, yield differentials have widened and job creation and wages have been stronger than expected. Risks to the view include rising political uncertainty as Brexit negotiations move into the details, and the fact that market participants are modestly long and the Bank of England’s decision not to hike in May could signal a less hawkish turn.

      Swiss Franc: The AAC maintained its heavily underweight view. The franc is still overvalued based on PPP measures, and that is keeping inflation low. It is one of the most attractive funding currencies and the Swiss National Bank will likely lean against any rapid appreciation. Risks to the view include Italian and Spanish political uncertainty, Switzerland’s strong current account balance and a potential uptick in the country’s inflation dynamics.

      Up For Debate

      The First Shots in a Trade War?

      The second quarter ended with some notably tough talk on trade, culminating in a fractious G7 meeting and confirmation of a first round of new tariffs between the U.S. and China. For the first time, these trade headlines had a clear effect on market sentiment.

      The Asset Allocation Committee (“AAC” or the “Committee”) recognized that markets still aren’t sure whether to trust the current U.S. administration to set a coherent trade strategy and make it stick. Until that trust is won, anxiety and volatility is likely to increase rather than decrease. Ultimately, however, the consensus among members is that the two main players in this drama have enough incentives to back down and avoid a truly damaging outcome, as long as they can do so while saving face.

      The first shots were being fired as the Committee met. On June 15, the U.S. confirmed tariffs of up to 25% on $50 billion worth of Chinese goods, and China responded almost immediately with its own tariffs on $50 billion worth of U.S. goods. Economists estimated the cost would be around one-tenth of a percentage point of both U.S. and Chinese GDP. However, the U.S. responded to China’s quick retaliation with talk of a new set of measures covering as much as $200 billion worth of products, potentially knocking three-tenths of a percent off the two nations’ GDP.

      Peter Navarro, trade advisor to the White House, has warned that “China has much more to lose” because it exports much more to the U.S. than it imports. Some AAC members played down this threatening language, however, pointing out that China would have plenty of scope to retaliate through the many U.S. companies doing business in China, rather than solely through tariffs. In addition, while the biggest market reactions have so far come outside the U.S., some Committee members suggested that China might have the higher pain threshold should U.S. equities begin to sell off in the run up to the mid-term elections, or agricultural commodity prices weaken into harvest season.

      In our discussion, the cosmetics around the November elections loomed large. China’s initial offer to raise its purchases of U.S. goods was not only a little too vague, some AAC members suggested, but also too early and too easy for the White House to accept. When the timing is better for creating strong headlines for election season, they explained, a similar offer with more detail should be enough to break the deadlock.

      “Agreement is likely but things may have to get worse before they get better,” said one Committee member. “The U.S. administration feels the need to drive close to the wall to crank up the pressure—but I’m not 100% convinced they won’t hit that wall.”

      The value of U.S. imports from China has grown by more than 200% in 15 years
      Source: FactSet.

      Emerging Markets—Opportunity or Warning?

      One of the more notable stories in financial markets this year has been the underperformance of emerging markets debt, particularly against U.S. high yield, its perennial competitor in the yield-seeking portion of many portfolios. Despite higher average credit ratings, the spread of the JPMorgan EMBI Global Diversified Index over U.S. Treasuries is as wide as that of the Barclays U.S. High Yield Index for the first time since 2005.

      The Asset Allocation Committee (“AAC” or the “Committee”) faced a big question: Is this an early warning of the more widespread damage that rising real interest rates, a trade war and a surging dollar could wreak, or a multi-year value opportunity?

      Overall, our view is quite clear. The Committee maintained its overweight view on emerging markets equity and debt. In common with much of the outlook this quarter, however, that view comes with nuances.

      First, hard currency emerging markets debt represents the most extreme short-duration value opportunity in a general environment of flat yield and credit curves: The one- to three-year bonds in the JPMorgan EMBI Global Diversified Index were actually yielding 12 basis points more than the full index at the end of May. This view is almost as much about the short end of the curve as it is about emerging markets.

      Second, while the Committee’s view on hard currency bonds has been upgraded from neutral to overweight, its view on local currency bonds (and emerging currencies themselves) has been downgraded to neutral. To some extent this reflects concern—not our central scenario—about the potential upward force of U.S. yields, a shrinking Federal Reserve balance sheet and safe-haven flows on the dollar. It is more clearly a relative-value judgment, however.

      Some Committee members compared the current sell-off to those of 2015–16 and the “Taper Tantrum” of 2013. They contrasted the declining commodity prices and the troubles in the big economies of Russia and Brazil with the higher commodity prices and more localized issues in Turkey and Argentina that we have today. Likewise, the sensitivity of local currency bonds to rising U.S. Treasury yields this year has been very subdued compared with the turmoil of the Taper Tantrum, when current account balances and other fundamentals were much weaker. By contrast, the sell-off in hard currency bonds has been more pronounced this year, to the extent that the AAC considers the asset class to be extremely oversold.

      “After a two-year recovery emerging markets debt was ripe for a correction,” as one Committee member put it. “It may get worse before it gets better, but our long-term fundamental views haven’t changed and if we are right to expect more agreement on trade then current valuations may represent an attractive opportunity.”

      Emerging markets hard currency credit spread converges with the U.S. high yield spread Spread differential, in basis points, between the credit spreads of the JPMorgan EMBI Global Diversified Index and the Bloomberg Barclays U.S. Corporate High Yield Index
      Source: JPMorgan, Bloomberg Barclays. Data as of June 30, 2018.
      Unlike during the “Taper Tantrum”, hard currency emerging markets has sold off in tandem with local currency Return for 12 months to June 2018, and for 2013 (%)
      Source: Bloomberg. Hard currency sovereign bonds represented by JPMorgan EMBI Global Diversified Composite Index; local currency sovereign bonds represented by JPMorgan GBI-EM Global Diversified Composite. Data as of June 27, 2018.

      Asset Allocation Committee

      About the Members

      Neuberger Berman’s Asset Allocation Committee meets every quarter to poll its members on their outlook for the next 12 months on each of the asset classes noted and, through debate and discussion, to refine our market outlook. The panel covers the gamut of investments and markets, bringing together diverse industry knowledge, with an average of 25 years of experience.

      Joseph V. Amato

      Co-Chair, President and Chief Investment Officer — Equities

      Erik L. Knutzen, CFA, CAIA

      Co-Chair, Chief Investment Officer — Multi-Asset Class

      Thanos Bardas, PhD

      Senior Portfolio Manager, Head of Global Rates

      Ashok Bhatia, CFA

      Senior Portfolio Manager — Fixed Income

      Timothy F. Creedon, CFA

      Director of Global Equity Research

      Alan H. Dorsey, CFA

      CIO of Wealth Management and the Neuberger Berman Trust Company

      Ajay Singh Jain, CFA

      Head of Multi-Asset Class Portfolio Management

      Andrew Johnson

      Head of Global Investment Grade Fixed Income

      David G. Kupperman, PhD

      Co-Head, NB Alternative Investment Management

      Ugo Lancioni

      Head of Global Currency

      Brad Tank

      Chief Investment Officer — Fixed Income

      Anthony D. Tutrone

      Global Head of Alternatives


      *As of 3Q 2018. Views shown reflect near-term tactical asset allocation views and are based on a hypothetical reference portfolio. Nothing herein constitutes a recommendation, investment advice or a suggestion to engage in or refrain from any investment-related course of action.

      This material is provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. This material is general in nature and is not directed to any category of investors and should not be regarded as individualized, a recommendation, investment advice or a suggestion to engage in or refrain from any investment-related course of action. Neuberger Berman is not providing this material in a fiduciary capacity and has a financial interest in the sale of its products and services. Neuberger Berman, as well as its employees, does not provide tax or legal advice. You should consult your accountant, tax adviser and/or attorney for advice concerning your particular circumstances. Information is obtained from sources deemed reliable, but there is no representation or warranty as to its accuracy, completeness or reliability. All information is current as of the date of this material and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Neuberger Berman products and services may not be available in all jurisdictions or to all client types. Investing entails risks, including possible loss of principal. Investments in hedge funds and private equity are speculative and involve a higher degree of risk than more traditional investments. Investments in hedge funds and private equity are intended for sophisticated investors only. Indexes are unmanaged and are not available for direct investment. Past performance is no guarantee of future results.

      The views expressed herein are generally those of Neuberger Berman’s Asset Allocation Committee, which comprises professionals across multiple disciplines, including equity and fixed income strategists and portfolio managers. The Asset Allocation Committee reviews and sets long-term asset allocation models, establishes preferred near-term tactical asset class allocations and, upon request, reviews asset allocations for large diversified mandates and makes client-specific asset allocation recommendations. The views and recommendations of the Asset Allocation Committee may not reflect the views of the firm as a whole, and Neuberger Berman advisors and portfolio managers may recommend or take contrary positions to the views and recommendations of the Asset Allocation Committee. The Asset Allocation Committee views do not constitute a prediction or projection of future events or future market behavior. This material may include estimates, outlooks, projections and other “forward-looking statements.” Due to a variety of factors, actual events or market behavior may differ significantly from any views expressed.

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