Highlights:

• Central banks (CBs) are still showing their teeth, frontloading rate hikes and asserting their  inflation credentials. But the Fed and ECB’s distancing from forward guidance is likely coinciding with a pivot towards less aggressive tightening.
• Indeed, risks to growth are rising steadily. A moderate H2 recession is now our base case for the euro area. This will strengthen the case for a more calibrated monetary tightening after summer.
• Also expect the Fed to turn less hawkish by then. Investors may be front running this already, hence the recent bounce in equities. Yet we keep a prudent risk stance for now, in a fast deteriorating economic environment: underweight Equities, HY Credit and non-core debt (TPI unconvincing). We see value in safer Credit segments and USD.
   

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