- The policy-led rally has flattened out but we expect risk sentiment to be resilient over summer. Investor positioning, the economic bounce, dollar weakness and ongoing policy support still dominate for now.
- But clouds will be mounting this autumn. Already the US recovery is floundering, and hopes of a Vshape will die after summer. Covid will prove more threatening, and political risk will be rising.
- Our allocation recommendation retains a risk-on bias for now, but a cautious one, focused on IG Credit. The equity OW is minimal and defensive. We stay bearish USD and warn against duration shorts.