Global Asset Allocation Viewpoints

• We remain neutral on equities reflecting a balanced view between decent fundamentals including a constructive earnings outlook and fiscal stimulus against elevated valuations and ongoing geopolitical tensions in the Middle East.
• Within equities, we trimmed our global ex-US overweight following a strong April rebound, shifted to a modest overweight to growth, and took profits after small-cap outperformance while maintaining an overweight position.

• We maintain a short duration profile through underweights to long-term U.S. Treasuries and core bonds, along with an overweight to high yield.
• However, our move this month to move to a slight underweight to floating rate bonds modestly increases overall duration.

• Though we still find cash yield levels reasonably attractive, we maintain a neutral position given cash yields are slightly below short-term bond yields.

Despite elevated valuations, earnings and fiscal stimulus remain supportive. Although if energy prices remain elevated, inflation and policy risks could rise.

Fiscal support and attractive valuations offer tailwinds, though if energy prices stay elevated, supply risks could meaningfully weigh on growth.

Valuations remain attractive and cyclical improvement is emerging, though fiscal constraints persist. If energy prices rise further, stagflation risks increase.

Positive growth and fiscal support aid equities, though if energy costs remain elevated, import pressures and tighter policy could weigh on momentum.

Stronger energy prices support earnings, though if sustained, inflation risks and policy uncertainty could limit upside.

Attractive valuations and resource demand support equities, though if energy prices remain elevated, regional demand risks and policy constraints may weigh.

Global growth and stable currencies support equities, though if energy prices remain elevated, inflation and external pressures could increase.

Policy support and improving activity help bolster sentiment. Anti-involution efforts bode well for profit growth over the medium-term. However, rising energy costs and structural housing market weakness will be headwinds.

Tailwinds increasing due to the shift to agentic AI. However, skepticism over the sustainability of massive capex spending should limit valuation expansion.

Sector supported by fiscal policy, re-shoring and capex. However, prospect for Fed cuts has weakened and duration of Iran conflict could ultimately weigh on growth.

Growth stocks’ valuations are relatively expensive, while fundamentals remain somewhat underwhelming, and rising energy costs will be a headwind.

Strong fiscal outlook and normalized interest rate environment driving earnings growth, particularly in financials. However, energy costs likely weigh on growth.

Fundamentals are strong and accelerating among AI infrastructure beneficiaries. However, scrutiny over rising capex coinciding with mounting competitive risks.

Mid-cap companies generally have lower leverage with potential for higher quality earnings growth relative to small-caps, but could offer less upside in the cyclical upswing.

Small-cap earnings improving due to deregulation, fiscal stimulus and broadening AI benefits. However, cyclical strength could be impacted by higher energy costs.

Rising global fiscal stimulus, particularly in Europe and Japan offer support. However, restricted energy supply could weigh on business and consumer sentiment.

Monetary and fiscal policies along with a weaker dollar are beginning to provide tailwinds for cyclical areas with still very attractive valuations.

Mitigates risk from rising inflation pertaining to higher energy prices, and benefits from AI build-out demand. This area could also benefit from a weakening U.S. dollar.

Rising inflation expectations and fewer Fed cuts placing upward pressure on rates. Credit fundamentals still supportive, with spreads expensive relative to history.

Attractive yield levels, however higher vulnerabilities to energy price shocks could lead to hawkish central bank responses.

Concerns around rising inflation expectations and fiscal deficits could keep upward pressure on long-end yields, with limited recession risk.

Inflation expectations remains elevated due to energy price shocks, though they may not be fully reflected in breakevens.

Tight spreads may limit further potential upside, but sector continues to offer a healthy yield, measured default expectations and a low duration profile.

Sector still offers attractive yield levels, however, software sector challenges and tight spreads could limit further upside.

Attractive yields and fundamentals are supportive, though geopolitical backdrop could create a bifurcated environment.

Compelling yields combined with expectations for a weaker U.S. dollar point to a favorable outlook. However, geopolitical tensions could weigh on sentiment.