- After a buoyant August for risk assets, the rally is likely to flatten out. Rising new infections into the autumn, a levelling recovery pace and diverse political risks (US politics, Brexit, geopolitics) will keep a lid on risk sentiment.
- Yet recovering data, committed central banks, falling Covid-19 lethality and optimism about vaccines still support a slight pro-risk bias.
- We keep a prudent overexposure to risky assets, centred in high-quality buckets of Credit. Look to increase the pro-cyclical bias in portfolios as the Covid paralysis fades out