Highlights:

• Amid reaccelerating US inflation, markets have axed rate cut expectations for all major central banks. We expect the start of Fed easing to be postponed until September, but not cancelled. A first ECB rate cut remains due in June with at least quarterly cuts to follow thereafter.
• We acknowledge two-sided risk for yields near term, with a resilient US economy and stickier prices the most imminent risks. But with a lot of bad inflation news now priced in, and 5-year forward 3-month rates near 4%, we see value in prudent long duration.
• Amid the tug of war between high valuations and higher uncertainties on the one hand and global economic green shoots on the other, we keep an overexposure in Investment Grade (IG) Credit to reap the carry from risk premia.
• Yet we keep a neutral stance on Equities and High Yield amid elevated risks of further setbacks.

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