A broader catch-up rally ahead?

Concentration in US equities remains extreme, with the Mag 7 comprising a third of the S&P 500. This has led to significant underperformance in equal-weighted indices.

Earnings season is approaching, and if growth expectations of nearly 30% are met, it could fuel a broadening out of the market. The upcoming US midterm elections are a key variable; a divided government might reduce scrutiny on tech stocks, potentially benefiting other sectors.

We anticipate a market that broadens, with large caps seeing more modest gains while other stocks catch up. Active management will be vital for navigating this shift. In fixed income, short-duration strategies and investment-grade credit are favored in a resilient growth scenario. If inflation persists, focus shifts to large-cap quality stocks and ultra-short duration bonds.