A just-published report updated our multi-asset recommendations, noting that while the risk-on phase should continue in the near run, the cycle is not over in terms of policy tightening. The global economy will prove more resilient than investors anticipate, although it exhibits late- rather than early-cycle characteristics that should temper investor enthusiasm on a 6-12 month horizon.
We expect central banks to disappoint market expectations of rate cuts later this year, underpinning our underweight on bonds over a 6-12 month investment timeframe. More positively, the recent shift in equity market leadership away from the U.S. market should persist, and we remain overweight the euro area and emerging markets while underweighting the U.S. within a global equity portfolio.
We upgraded commodities to neutral as China and the euro area are regaining economic momentum and the U.S. dollar is poised to weaken further. Continue to favor the euro, yen and an EM currency basket against the U.S. dollar.