The better outlook on the growth/inflation mix for the year ahead has quickly been incorporated by risky assets, from equities to high yield via credit markets. As the extreme investor pessimism of last October is now in the distant past, we are reducing our overall equity allocation to a more neutral stance. As already discussed in our year-ahead Outlook, the rise in risky assets we expected for 2023 should be limited to the upside by central bank action, as they will ensure that financial conditions do not ease too quickly if the economy is holding up. Given the fundamental support from all major economic regions, we think that central banks’ data dependency could become an obstacle for markets as the economy appears more resilient than most expected only a couple of months ago.


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