Government bonds are perfectly suited right now for the picnic on this plateau, as bond prices have always risen after the final interest rate hike in the past. As we continue to anticipate a recession in the USA in the second half of the year and then also in Europe with a lag, yields are likely to fall further despite the interest rate curve already being inverted. We are therefore once again increasing our overweight in government bonds, while remaining underweight in corporates.
Global equities are still not such a good bet
Valuations have been all over the place. Stock markets have been bobbing along without direction since the beginning of April, but with strong shifts in the equity structure. Since February, the equal-weight S&P 500 has lost around 6%, while the Nasdaq 100 has gained 13%. Market breadth has been miserable: equity indices have been propped up almost by US megacaps alone. We remain slightly underweight in equities and continue to favour cat bonds and Swiss real estate.