Adapting to a Structurally Higher Nominal World

Markets appear to be moving from a macro-led rally toward one driven more by earnings and cash flow, which helps explain the preference for the US and Japan.

Higher yields are not necessarily a warning sign if they reflect stronger nominal growth and resilient corporate profits rather than financial stress.

Against that backdrop, the stance remains overweight US equities and Japan, with a more cautious view on Europe.

In fixed income, the focus is still on carry rather than extending duration, since this looks more like a late-cycle nominal growth environment than a recession market.