Expectations of persistent inflation leading to tighter central bank monetary policy are likely to continue to weigh on fixed income markets. In our view, the scope for further rises in real yields and term premia justifies a sizeable underweight position in bonds. As for equities, company earnings (excluding the energy sector) have been better than expected, but a less-than-bright outlook argues for a limited risk exposure.
Watch our video with Maya Bhandari, head of multi-asset, and chief market strategist Daniel Morris as they discuss topics including Covid-related developments in China and the – favourable – prospects for commodities. On European equities, they agree the asset class appears expensive with no end to inflation, growth and supply chain pressures in sight.
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