• Overall, the overall macro and liquidity conditions are rather positive for risk assets. Still, equity market valuations are rich, especially in developed markets and some risks are under-priced. Consequently, while we keep our preference for equities over bonds, we refrain to increase exposure at this stage. We keep our neutral stance on equities. • Our view on Eurozone equities is downgraded from neutral to negative, mainly due to weakening economic trend, while we upgrade our view on emerging markets from negative to neutral (China stimulus, improving earnings dynamic, room for easier monetary policy). • Within rates, we continue to favour the 1-10 years segment over long-dated bonds. • We keep our gold and hedge funds exposure for diversification purposes. Our stance on currency (neutral dollar against major pairs) is unchanged.

We expect the Fed rate cut cycle to start soon and proceed gradually. Barring a financial crisis or a sharp and unexpected change in the path of inflation or unemployment, the upcoming rate-cutting cycle won’t be dramatic; we expect the Fed to make incremental, 25 bps cuts to its policy rate. Moreover, the Fed is going to stay highly data dependent and will calibrate accordingly. Overall, this is a rather positive scenario for risk assets. Still, equity market valuations are becoming rich, especially in developed markets. Consequently, we keep our neutral stance on equities. We are upgrading all currencies (EUR, CHF, CHF, JPY, EM currencies) back to neutral vs USD (from Negative). Technicals have turned against the US dollar and the Fed has sent a clear signal about coming rate cuts.

We believe that the current market correction is driven by technical factors rather than macro and fundamentals. The unwinding of the yen carry trade was an accident waiting to happen (see our June 2022 FOCUS note “Has Japan’s central bank created a monster?”). The heavy net long positioning by CTAs, the traditional low liquidity of August and the high valuation ratios of some crowded trades (e.g Mag 7) created the perfect “summer cocktail” for pullbacks of major global equity indices and a spectacular spike of the VIX. As explained in our FAQ, there is no reason to panic as macro and fundamental conditions remain favourable to equity markets. Still, history shows that stock markets remain bumpy in the 4 to 6 weeks which follow a spike in the VIX. As such, we’re keeping the current equity allocation unchanged (neutral vs. SAA) and adding some long duration bonds to portfolios as a diversifier.

Key takeaways: • After a strong first half of the year for equity markets, we believe that there are 5 key themes to watch in the coming months: 1) Normalisation of global economic growth; 2) Labour market normalisation; 3) Central banks kicking off their easing cycle; 4) The normalisation of the equity market leadership and; 5) A pick-up in volatility. • On a more tactical basis, our view on risk assets remains constructive but there are indeed a few indicators which lead us to become slightly more prudent as we head into Summer. As such, we have been rebalancing our clients’ portfolios to reflect our neutral view on equities. We recently decreased our slight tactical overweight on equities back to neutral. We remain underweight fixed income and overweight alternatives and Gold. We also decided to downgrade our view on the JPY from NEUTRAL to negative vs USD and all major currencies. We remain positive dollar against EUR, GBP and CHF.

Key takeaways • We believe global economic growth could soften but will likely remain positive while the disinflation trend should stay in place. This, coupled with monetary and fiscal policy support ahead of the US elections, is creating an attractive backdrop for equity markets in the months ahead. • Within our opportunistic asset-allocation guidance, we recommend clients to go underweight Fixed Income and overweight U.S and European stocks while staying underweight Emerging markets stocks. Commodities and Gold are still useful portfolio diversifiers. We are staying long dollars. • There is one change within our preference grid this month: we increase Government bonds 1-10 years from NEUTRAL to POSITIVE

Key takeaways • There has been a change of tone in the markets with equities pulling back in April and US 10-year yield moving up 45 basis points over the month, while gold and the dollar soared. • The weight of evidence of our fundamental and market dynamics indicators leads us to remain neutral to positive on equities. While markets could stay choppy for a little while, we believe that the pullback could be contained, and that further equity market weakness is buyable. • Going forward, we want to keep our allocation to Equities close to our strategic asset allocation (SAA) neutral weights. We upgraded our stance on European stocks (from neutral to positive) and downgraded our view on Japanese stocks from positive to neutral. We remain negative in fixed income and downgraded our view on Emerging markets bonds. We have also upgraded our stance on Commodities to positive from neutral. Last but not least, we reduced all currencies by one “notch” vs. USD: EUR, CHF, GBP & EM are reduced down to negative (from neutral) while JPY is down to neutral (from positive).

The global growth cycle hit its lowest point in 2023 and is now picking up. Earnings estimates have been creeping higher. Although central banks are hesitant to lower interest rates at this moment, they are conveying more accommodative signals to the market, which maintains the prevailing "risk-on" sentiment.

US economy rebounds with robust job creation and wage growth. Risk assets soar with the S&P 500 hitting historic highs and Japan's Nikkei 225 at a 34-year peak. Our diversified strategy pays off; adjusting Switzerland and Emerging Markets in equities, upgrading GBP yield curve in fixed income, and tweaking forex positions.

We expect the US & global economy to cool down in the months to come, leading to a Fed pause. This would be a positive for equity and bond markets over time.

Key takeaways: • After a strong first half of the year, the mood has shifted during the Summer as markets are adjusting to the reality of “persisting inflation & sticky rates”, a narrative which is adding pressure on equities and valuations. • While equity and bond market volatility could persist in the short-run, particularly through a historically choppy September/October, we expect more positive market conditions towards the end of the year. Indeed, with the US & global economy cooling down in the months to come, central banks are expected to pause their monetary policy tightening. This would be a positive for equity and bond markets over time. • We remain neutral on equities, rates and credit. Cash and bond yields are a clear competition to equities and our multi-assets portfolios reflect this reality. We are negative on the EUR and CHF against dollar. We upgraded Swiss equities to positive. We are keeping Gold as a diversifier. • We continue to favour 3 main investment themes: 1) Diversify into the lagging segments of the equity market that carry lower valuations; 2) Use volatility at our own advantage by buying on pullbacks; and 3) Use the bear steepening of the curve to extend duration within fixed-income portfolios.