Nervous markets are torn between the dovish ‘pivot’ by global central banks and the ‘pervasive uncertainty’ on the outlook for global growth.
Assets sensitive to central bank liquidity – core government bonds, higher-quality corporate credit and emerging market (EM) debt – have outperformed more growth-sensitive low-rated bonds, European cyclical assets and EM currencies.
We expect global growth to stabilise in the second quarter and to pick-up into the second half of the year, allowing the laggards in the risk rally to catch up and core rates to drift higher.
In the current low and stable rates environment, we are focused on extracting carry without taking excessive risk.
In the meantime, we patiently await the economic data and corporate earnings guidance to confirm our thesis that global growth has troughed.