Cyclical dynamics remain positive for the global financial system. The “Goldilocks” environment, i.e. positive global growth, even accelerating in many countries, and mild inflation, is supportive of risky assets.
Expensive valuations in developed markets remain a source of risk in a high leveraged and low productivity economy, and at the same time, Central Banks around the world are moving towards a more restrictive monetary policy. This monetary shift is taking place gradually but it is going to reduce liquidity in the global financial system.
Consequently, we keep our underweight positions in equities. We also retain our underweight position in developed market government bonds, We expect EURUSD to appreciate due to better than expected performance of the European economy.