By Christopher Dhanraj, Head of iShares Investment Strategy at BlackRock.

“Pressure Drop,” the classic Toots and the Maytals song, comes to mind as we see a de-escalation in trade tensions with China, diminishing risks of a no-deal Brexit, and few signs that the record US economic expansion is ending or reversing.

Christopher Dhanraj, Head of ETF Investment Strategy, BlackRock.

Still, persistent trade uncertainty is denting business confidence and spending, particularly the longer-term risk of an unraveling of the global supply chain.

Against this backdrop, we outline five major investor themes for the weeks ahead.

1. Within US equities, be careful steering among defensive and cyclical sectors.

Defensive sectors have outperformed cyclicals this year against a backdrop of slowing growth and falling interest rates. However, we expect central bank easing could provide a floor for growth in the coming months. Among cyclicals, we remain constructive on technology, while we prefer less rate-sensitive sectors such as healthcare among defensives.

Source: BlackRock.

2. Among developed markets, a bottoming of the growth slowdown may help, but we still see a winter of discontent.

Trade uncertainties and slowing growth have taken a toll on developed world stocks outside the United States. But not all DMs are created equal, and there are signs that the global growth slowdown has hit bottom, while central bank easing could help. We are neutral on Europe and underweight Japan.

3. Although a trade truce helps China, the slowing growth outlook warrants a cautious approach.

A temporary trade truce with the United States provided some optimism around China over the last month. However, China’s growth slowdown has become more pronounced. Investors may want to consider EM ex-China exposures to hedge out the potential risks associated with a Chinese slowdown and any potential negative trade news.

4. Within fixed income, among the swings in yields consider seeking defense in investment grade credit.

US government bond yields have responded to geopolitical risks over the past few months both ways, which underscores bonds’ important role as a diversifier. Meanwhile, investment grade credit continues to lead sectoral performance, supported by easing financial conditions, a still-growing domestic backdrop and investors seeking high-quality yield. An up-in quality approach may allay fears over potential downgrades.

5. The outlook for value has made it a candidate for the comeback king.

We remain in an unfavorable environment for value, given slower growth and the return of “lower-for-longer” interest rates. Still, our outlook for value has improved and now stands at a neutral position as relative valuations appear quite cheap. Our outlooks for minimum volatility and quality have similarly improved.

(The views expressed here are those of the author and do not necessarily reflect those of ETF Strategy.)