Highlights:

• Markets’ more cautious stance on risk assets is set to continue as the support from resilient US growth is increasingly offset by the need for high rates for longer.
• We still expect more economic pain to erode corporate margins, especially in the euro area, while elevated equity valuations look vulnerable to a correction.
• We keep a prudent underweight in Equity and HY while overweighting safer IG Credit and EM debt mainly due to an attractive carry.
• A continued growth slowdown and a higher probability that the Fed and ECB will skip rate hikes in September point to slightly lower yields. Yet a continued hawkish bias in central banks’ forward communication will likely prevent a stronger bond rally.
  
   

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