Highlights:

• Overly ambitious rate cuts expectations by the turn of the year have deflated to now far more reasonable levels. Notwithstanding concerns about the ‘last mile’ of the disinflation journey, we are starting to warm up to bonds; any further investor capitulation will be an opportunity to extend duration to beyond benchmark.
• Equity markets have proven remarkably resilient to the central bank repricing. This bifurcation owes much to the ‘AI miracle’ and rising optimism about the economy. Still, at this still fragile point of the cycle, and with (geo)political risk lurking, bullish investor sentiment and positioning, as well as depressed risk asset volatility, reflect a bit of complacency. 
• Our underweights in Equities and High Yield credit are small, but we prefer safer (IG) buckets in Fixed Income and retain a tactical Cash overweight.
   

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