Laws of Gravity
- Markets have climbed a wall of banking worries, with the help of resilient economic data and earnings, more dovish Fed expectations and fresh central bank liquidity.
- Yet we expect the looming credit crunch, lower earnings and rising defaults to still take their toll – and the laws of gravity to still apply. The war in Ukraine, simmering US/China tensions and the US debt ceiling are adding to the downside risks.
- We maintain a cautious stance on Equities and HY, while favouring carry from Government Bonds, non-financial EUR IG Credit and – more prudently – EM bonds. We also like US Treasuries for their hedging properties against more adverse scenarios.
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