- Our recommendation to significantly increase risk taking and cut cash positions last month (The law of diminishing return) has paid off. We stick to the view, as we enter a phase of significant central bank action: we expect a bold ECB package in September, and a second Fed cut that same month.
- The major risk lies in further economic growth disappointment, while Germany is flirting with recession. The trade talks and heightened Hard Brexit risk add uncertainty – a drag on growth.
- Our allocation reflects that battle between active central banks and rising economic risks. The former win for now, we think. Either PM Johnson turns less inflexible, or he risks being toppled by UK parliament in September. President Trump will not risk a hard landing into the Nov. 2020 election.