- Spring has come early this year, and risk assets too are flourishing – despite the slump in exports and industrial data. Investor participation has been poor, hence this rally still has legs for now.
- Global risks still abound (not least the US/EU trade spat), but the near-term triggers look rather friendly: China’s National People’s Congress, ECB meeting and Brexit (semi) conclusion. China’s policy support is starting to play out, and we remain confident that a sharper global downturn will be avoided. Importantly, low inflation has helped central banks turn more dovish, creating the conditions for a ‘mini-Goldilocks’.
- We keep a pro-risk bias, with a prudent overweight in equities and an underweight in Govies. We trim our short-duration bias especially in credit, where a steeper credit curve makes longer-dated EUR IG more attractive. We further reduce the cash OW.