Bottom Line

→ We have adjusted our equity exposure to Neutral amidst persisting positive momentum and encouraging data flow.

→ We favour European and UK large caps over US equities as valuations remain more attractive and economies are proving more resilient than expected.

→ We have also reinstated exposure to Japanese equities, although we remain Underweight overall.

The economic outlook remains in “contraction” territory, specifically with view towards the US. Similar indicators covering the Eurozone and the UK, however, suggest a bottoming-out of economic anxiety, showing unexpected resiliency amidst an abating energy crisis.
Valuations are “expensive” despite earnings forecasts in the US having somewhat recovered. Other regions, notably Europe and Japan, appear more reasonably valued.
Momentum for equities retain their positive trend based on the 10-months moving average metric that we favour. This suggests a positive outlook for risk assets in the short term.
Sentiment in markets remains bearish, as investors remain vigilant about persistent inflation, even amidst the latest rally in risk assets.

As ever, we are constantly monitoring markets. Should conditions change, particularly with regards to the economic regime or signals from our valuation, momentum and sentiment framework, we will adjust our asset allocation accordingly.

In accordance with the regulations in force, we inform the reader that this document is qualified as a promotional document. Unless specified, all figures and statistics in this report are from Bloomberg and Macrobond on 17/02/2023, publication completion date.