Invest for uncertainty

Secretary Bessent's "Treasury Twist" is unlikely to curb bond vigilantes, despite efforts to lower long-term yields. Market data suggests this intervention, reminiscent of his Soros days, may not succeed.

Two major uncertainties are the Iran conflict and the US midterm elections. The midterms historically see stock market dips followed by rallies, but this year's Q2 strength deviates from that pattern, adding to the uncertainty.

Given elevated geopolitical risk, focusing on current income from dividends or coupons is prudent. Diversified equities and disciplined processes can provide stability. We see a "sticky soft landing" or "stagflation lite" scenario, favoring short-duration bonds and quality large-cap equities. Emerging market debt could perform if the dollar stabilizes.