Global central banks have been key to supporting financial markets. The stimulus has offset weak economic growth and a poor corporate earnings environment. There is no reason to believe this monetary stimulus will end any time soon.

To be sure, there are risks. U.S. equity valuations are above historical average levels. The U.S. is engaged in tense trade negotiations with several countries (China, Mexico, Canada) and with the European Union; the focus of the U.S. could extend to other countries, e.g. Vietnam. A number of geopolitical issues also have the potential to worry investors, e.g. U.S. – Iran.

It remains to be seen how much longer expanding price to earnings multiples can offset falling earnings estimates, especially with the uncertainties outlined above. Net-net, it seems that U.S. stocks could stay at current levels or move a bit higher, but risks likely remain on the downside.

Bond yields seem likely to remain low. Unexpected economic weakness could be a catalyst to drive yields lower.

Download the full report here.