Looking back at the first half of 2019, bond and equity markets seem to be telling opposing stories, according to T.Rowe Price’s mid-year market outlook.

Strong gains in equity markets in the U.S. and certain emerging regions would appear to suggest a renewed confidence in earnings for the year to come, the report said. Meanwhile, tumbling bond yields, coupled with an inverted U.S. Treasury yield curve are pessimistic signals, it noted.

“We’ve had a long bull market and a long economic expansion,” said Rob Sharps, the firm’s head of investments and group chief investment officer in a press release. “We’re navigating crosscurrents right now, but I don’t see any significant dislocations. While we remain constructive long term, it’s also a challenging time to find good investment opportunities. Markets are near highs and risks are rising, so it’s not time to be a hero. It’s a good time to be diversified, invest strategically, and have your shopping list ready in case stocks pull back and go on sale.”

Looking ahead, for equities, trade between the U.S. and China and the ripple effect caused by the moves by both countries will be the linchpin for performance. The report called the trade war “corrosive” in terms of its impact on business confidence and capital spending, especially when it comes to countries relying heavily on exports like Germany, Japan, Korea and Taiwan.

“For investors, this is an interesting time when risk assets like stocks have performed well, but so have risk-off assets such as U.S. Treasuries and the dollar,” Sharps noted. “It’s a tug-of-war that’s likely to be resolved in the second half of the year and will depend on whether we see some form of resolution to the trade conflict and whether we get some improvement in global economic growth. We’re still a long way away from an absolute level of interest rates that would make it difficult for stocks not to be a relatively attractive asset class.

“The trade war presents significant issues that are starting to have real-world impacts on risk assets and on economies. Although the U.S. and Mexico reached a trade deal that appears to avoid tariffs, there seems to be a resolve in the U.S. not to accept a deal with China that would be perceived as weak. On that front, there may be more pain before we reach a point where there is a greater sense of urgency.”

The trade war, however, isn’t the only pain point of political turmoil, the report noted. Populism remains a prevalent risk to markets, it said. During the European Parliament’s latest election, various moderate parties lost significant ground to populists on both the left and right of the political spectrum.

“There is some concern that Europe might be entering a liquidity trap in which lower interest rates don’t stimulate economic growth,” said Justin Thomson, portfolio manager and chief investment officer for equities at T.Rowe Price. “That has essentially been the case in Japan since 1999, where even zero interest rates haven’t spurred growth. For European equities to perform en bloc, you need banks to perform well, and that requires an upward-sloping yield curve that we’re not seeing right now.”

Getting sector specific, the report highlighted the disruption that’s gone on in technology during the first half of the year. Notably, ride-share initial public offerings didn’t fare well, suggesting investors are wary of financing business plans that have an excessively long-term view when it comes to profitability. Meanwhile, established brands are fighting back against their more modern competitors, which could be seen in the example of Disney leveraging its own massive store of intellectual property in launching its own streaming service to compete with Netflix.

Other more established tech players have been plagued with rising consumer concerns over market power, data privacy and false or misleading content. While there haven’t yet been significant legislative efforts to address these concerns, the issue will be one to watch, the report said.