Highlights:

• The US economy has been exceptionally resilient to the 525bp Fed tightening but is now showing signs of fatigue. Surging oil prices may keep inflation high for longer.
• Market pricing seems disconnected from the significant economic and financial stability challenges associated with the delayed effects of massive rate hikes and ongoing Quantitative Tightening (QT). Risk asset volatility is too low, and earnings consensus too high.
• The key risk to our views lies in another supply shock causing higher energy prices and elevated bond yields for longer.
• Our tactical asset allocation recommendation continues to show a preference for the safer segments of Fixed Income over Equity and High Yield.

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