Just as the US/China trade truce provided broad-based relief, the new Coronavirus in China is unsettling global financial markets.
The fast-spreading disease is challenging the global macro rebound, but we still see resilience in the US and Euro area domestic demand.
Experience from past episodes suggests that markets tend to overshoot, but rebound once the number of new infections starts to slow.
We favour a more cautious stance near term. We maintain a moderate pro-risk tilt in the portfolios, but reduce our exposure to Equities and HighYield (HY) Credit. We keep our overweight in higher rated corporates andan underweight in government core bonds.