Highlights:

• A prospective last-minute deal on the US debt ceiling, resilient US activity and an AI boost to IT chip producers have helped risk assets to digest rising yields well in May.
• But mind the various gaps that are emerging. Pent-up demand in services is deeply overshadowed by mounting trouble in manufacturing. Equity and HY Credit resilience contrasts strong signs of a looming US recession, markedly higher real yields and evidence of a credit crunch.
• We stick to a prudent tactical tilt in our portfolios, moderately underweighting (UW) Equities and HY. We favour the carry from IG Credit and Government Bonds while avoiding unhedged USD exposure.

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