Are we there yet?
? Equities and bonds faced a challenging April as the Fed continued to guide rate hike expectations higher. However, as global central banks embark on policy tightening, the main question facing investors is whether we are approaching the bottom in risky assets.
? What can we learn from prior episodes of quantitative tightening? Is it time to start adding exposure to
bonds? Are earnings reports supporting the case for equities?
? Our still-benign recession checklist gives us confidence that equities can outperform bonds and cash once the Fed stops guiding rate expectations higher. We continue to prefer Asia ex-Japan equities, even if COVID-19 lockdowns in China delay the recovery.
? Bond yields could rise further before topping out. We favour EM USD government, Asia USD and US/European High Yield bonds where attractive valuations are a support; private credit and floating rate loans also offer an attractive risk/reward. We maintain our preference for commodity
currencies.