We remain positive on equities as economies re-open and policy support (fiscal and monetary stimulus used by policymakers to manage economic fluctuations) continues. We do, however, remain cognisant of valuations and incoming inflation data.

Despite a continued pick-up in yields, we still don’t see sufficient value to add back exposure. We expect yields to rise further amid the economic recovery.

Vaccine distribution and solid hopes of additional fiscal stimulus are driving the demand recovery while supply remains pressured by underinvestment across many sectors.

The probability of a vaccinated recovery in the second quarter of 2021 continues to have positive implications for credit, but we see little value in a portfolio context.

Whilst valuations remain at unattractive levels, the region should continue to benefit from government spending and a relatively strong vaccination programme.

We remain positive on UK equities, but downgraded our view this month with a strong pound likely to hold back significant market returns.

The region is well-exposed to global activity normalisation, but we have moderated our view given concerns over the vaccine rollout and fiscal stimulus.

We still expect the country’s export sectors to benefit from an economic recovery, but we have downgraded this month, expressing our preferences elsewhere in Asia.

We continue to see potential in this region, particularly within Korea and Taiwan.

We remain positive with a preference for emerging markets (EM) Asia, but also see potential in commodity exposed regions such as Latin America.

Sentiment has shifted towards higher US yields since January’s Senate run-off elections and the prospect of further significant fiscal stimulus.

We downgraded our view on UK government bonds as we see little value, particularly in shorter-term bonds which seem excessively overpriced.

It remains difficult to justify owning German government bonds at highly negative real yields.

We remain negative on Japanese bonds as they continue to offer no value in a portfolio context.

Inflation breakeven rates have normalised and we remain positive as ‘protection’ against upside inflation surprises later on in the year.

We remain supportive on the medium-term outlook for EM local bonds, particularly with regards to regions that provide some diversification, such as Korea and Israel.

Whilst fundamentals remain weak, they are improving with US company earnings so far surprising to the upside. A strong relative vaccine rollout is also supportive. 

Valuations remain expensive and the vaccine rollout has flattered to deceive thus far, but government support and investor demand should continue.

Opportunities still remain in the higher quality EM corporate bond sector, as well as in the upper tier of the government high yield (HY) market.

Fundamentals remain weaker than Europe, but a strong vaccine rollout should help and lending conditions have also improved versus Europe.

We have downgraded our view on European HY reflecting concerns over a stuttering recovery and the longer-term impact of the economic recession.

Whilst we remain positive on energy on a fundamental basis, we have downgraded our view this month after the recent strong performance.

Stubbornly low real yields and lighter investor positioning suggests some catch-up potential, but we remain on the sidelines for now.

Weakening credit growth and survey data from China is concerning, but ex-China demand should continue to drive prices higher.

Agricultural prices have continued to grind higher, but we believe the supply and demand picture remains balanced.

We remain positive in a portfolio context, but fundamentals have also improved as the Democratic sweep should prompt stronger fiscal policy, lifting relative US growth.

Economic data continues to disappoint, but a strong vaccine rollout program could offer some hope for sterling outperformance.

We have downgraded the euro to neutral. Policymakers have started to talk down euro strength again with interest rate cuts a potential action.

This downgrade reflects the better vaccine story, higher growth, inflation and interest rate outlook for the US. It also reflects the positive yield differential of the US dollar versus the Japanese yen.

The Swiss franc is under pressure from a stronger US dollar, but it remains attractive versus the euro given the risks from the European vaccine rollout.