Chasing the bandwagon?
- Easing US inflation and receding energy prices have extended a synchronized rally of bonds and equities that investors may be tempted to chase.
- We see rising appeal in US bond markets as UST yields are likely past peak. Similarly, a decent carry renders high quality EA Credit attractive, with risks of stronger yield/spread increases muted.
- Yet we are prudent on riskier buckets, including Equities and HY Credit. They are not priced for a recession, the strong determination of central banks to rein inflation in, nor China’s undecisive and Covid-frustrated effort to support growth.