We maintain our tactically neutral position on equities, with the notable exception of Japan, where we see scope for a re-start to Abenomics and for Japanese stocks to continue to close their performance gap with their peers in other developed markets.
Though recourse to options trades, we are prepared for an increase in volatility as markets adjust to slowing growth momentum. While they may consolidate in the short term, we remain broadly optimistic on equities longer term.
With bond yields rising again, the negative performance of government bonds is helping justify our underweight stance on these instruments. But we are overweight local-currency Chinese bonds, which offer attractive carry and a stable renminbi and should benefit from policy