Asset Allocation: the cycle lives on
With equities pricing in a 50% probability of an imminent recession which we
view as highly unlikely and the rates market continuing to disbelieve that the
Fed would go through with its planned normalization we share our asset
Where relative valuation remains at the top of its historical
band, we remain neutral and where valuations are low despite strong growth,
we are overweight. We maintain our view on the prospects tied to the yen.
We discuss in detail our sector weightings and preferences basing our
underlying thesis on valuation, earnings growth and positioning, for instance
what to do in a sector where valuation looks fair but the positioning creates a
large overhang. Within bonds, we examine the High Yield vs High Grade view
with a look to carry and duration.