Christian Nolting

Given solid year-to-date performance of equities and because of expected volatility around the US presidential election, we maintained our market-cap barbell strategy of focusing on US growth, tech and healthcare, plus US and European small caps. 

With a solid economic outlook and expectations that central banks are willing and able to make adequate monetary policy decisions, we maintained our overweight on investment grade bonds. However, the overweight on high yield was reduced to an underweight, given a strong performance and very tight yield spread. As we assume generally elevated and somewhat higher inflation rates and long-term bond yields, bonds with short- to medium-term duration are preferred. After the decisive Trump election victory, his policy priorities will be reflected in sector and stock allocation.

Markets are too optimistic about the inflation outlook. There will be fewer interest rate cuts than the market assumes. Therefore, the terminal rate the Federal Reserve can reach in this cycle should be higher. The yield curve is expected to steepen in the upcoming months.

The Coming Wave: Technology, Power, and the Twenty-first Century’s Greatest Dilemma, by Michael Bhaskar and Mustafa Suleyman