Now the hard part

Now the hard part. Risk assets have performed strongly this year but now need the green shoots to translate into stronger hard data. There is still room for positioning adjustment to feed the rally, but expect it to turn less smooth and forceful.

Highlights:

  • Now the hard part. Risk assets have performed strongly this year but now need the green shoots to translate into stronger hard data. There is still room for positioning adjustment to feed the rally, but expect it to turn less smooth and forceful.
  • Trade talks, especially US/EU, remain a major risk, but we assume that Trump will not take any major self-defeating action ahead of the 2020 election.
  • Inflation has continued to undershoot, which is at the heart of the dovish CB stance and low bond yields. The balance of risks in the near term remains tilted towards further dovish surprises.
  • We keep a pro-risk bias, with a prudent overweight in equities, a larger one in Credit and an underweight in Govies. Our duration extension in Credit was well timed; we see residual value in long-dated Credit, as opposed to Govies.

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NOW THE HARD PART

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