Key insights

• We are at mid-cycle and the easy gains have been made, but we have a preference for risk assets. Valuations in both growth and defensive asset classes are stretched and there is little benefit in holding excess cash. It is now a game of relativities.
• We prefer Aussie equities over Europe and the US. Japan and EM are our least preferred equity markets.
• In defensive assets, we prefer global real estate and infrastructure over government bonds and credit. In government bonds we prefer Australia over global bonds, with the recent lockdowns in Sydney and Melbourne and the low COVID-19 vaccination rate a near-term support.
• Investment grade duration is relatively attractive in US credit. High yield and short duration investment grade spreads are stretched.

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