Our view on US equities is still neutral. The US economy displays continued resilience, with robust economic growth, strong labour markets and falling inflation. However, valuations at the index level remain rich and the upcoming election represents a near-term risk catalyst. Given these factors, we believe it is preferable for investors to take regional equity risk elsewhere.

We still take an underweight view on European equities. Earnings momentum in Europe remains weak and growth expectations are lacklustre. Germany’s sluggish economy and France’s political uncertainty have further clouded the economic outlook. We do not see a compelling near-term catalyst for European equities’ outperformance relative to other regional equity markets.

We maintain our overweight view on Japanese equities. Despite recent market volatility and potential short-term fluctuations, we still see a strong structural case for Japanese equities. Ongoing corporate governance improvements and a shift towards a more inflationary environment represent positive developments for Japanese equity markets. 

We have moved our stance on emerging markets equities from underweight to neutral. This change is primarily driven by an improved outlook on China, following the recent announcements around stimulus. While the government’s commitment can boost the Chinese equity market in the short term, structural headwinds persist. In addition, markets face increased uncertainty around the direction of US-China trade relations ahead of the upcoming US election.

Our neutral view on US rates is unchanged. US Treasury yields rose in the past couple of weeks, as markets began pricing out some expected cuts. With the upcoming elections in focus, we anticipate a higher budget deficit regardless of the outcome, while we still observe the risk of structurally higher inflation. Ultimately, the impact will depend on policy timing and execution. Consequently, we still view a tactical approach to duration positioning as appropriate, particularly given the potential for heightened rates volatility into the end of the year.

We still take a neutral view on European government bonds within the context of a core duration view. Europe’s macro fundamentals continue to deteriorate, with evidence that growth weakness is starting to spread beyond Germany into France, coupled with the looming risk of US tariffs. We view current pricing as reflective of the likely policy path from here.

We maintain a neutral view, given our expectation that the Bank of Japan (BOJ) will remain patient as it looks to normalise policy. Given the recent election results in Japan, political uncertainty might make it harder for the BOJ to hike rates this year and could also result in more fiscal loosening and higher inflation.

We expect spreads to remain range-bound, with limited scope for further tightening. As such, we see little potential for capital gains; hence, our neutral view.

We have reduced our overweight view on high yield to neutral. As spreads continued to tighten throughout the month, maintaining these levels will require exceptionally strong technicals from here, suggesting a more balanced risk/reward profile in the near term.

We maintain our neutral perspective on emerging markets debt (EMD). While we still forecast low growth in emerging markets economies, we now see a lower return differential between different credit assets. We expect the Fed cutting cycle to provide a tailwind for the asset class. With many of the idiosyncratic stories having played out, we believe that EMD is fair value at current prices.

We have adjusted our stance on energy markets from overweight to neutral. We anticipate weak oil demand for next year in an oversupplied market. While any further escalation of tensions in the Middle East could act as an upside catalyst, we are comfortable maintaining our neutral view for the time being. 

Our view on gold is still overweight. Upside inflation surprises represent a key risk ahead, especially with the upcoming US elections. With that in mind, we consider gold as an additional inflation hedge and diversifier within multi-asset portfolios. Gold has already significantly outperformed this year but, with real rates falling, we believe it remains a valuable trade moving forward.