Clockwise: The Investment Clock revisited

RLAM argues that the global economy is currently in Stagflation but may move toward Overheat, supporting a cautious yet positive stance on risk assets.

• The Investment Clock tracks global growth and inflation indicators to identify the economic regime, with growth on the vertical axis and inflation on the horizontal axis.
• RLAM’s analysis of business cycles from April 1973 to December 2025 finds that government bonds have historically performed best in Reflation, stocks in Recovery, commodities in Overheat and cash in Stagflation.
• The US has experienced 34 business-cycle peaks and troughs since 1854, while the average cycle has lasted about five years; the current post-pandemic expansion is six years old.
• The team sees little near-term recession risk because business confidence is rising and believes monetary tightening so far is insufficient to derail the economy, although further rate increases could trigger a recession.
• RLAM expects any move toward Overheat to feature stronger commodity prices, higher bond yields, earnings upgrades and further central-bank rate hikes, while geopolitical risks argue for commodities including gold.

Takeaway: The team remains positive on stocks, particularly technology, the US, Japan and selected emerging markets benefiting from AI, but also favours commodities and gold; investors should recognise that excessive tightening or an eventual technology bubble could reverse this outlook.