CITI’S TAKE
We added risk back on the day of the ceasefire announcement, given that an off-ramp appeared more likely than thought, while fundamentals on the growth side did not materially deteriorate. On the contrary, forward earnings estimates have been rising for most equity markets. While this may still change if the conflict lasts too long, support from AI and commodities is currently dominating. We added an emerging Asia overweight to our existing US overweight, as the tech tape should remain strong. We also cut our credit underweight on the same day. In rates, we remain overweight duration, using TIPS, but now partially hedged with an underweight in Gilts given the fiscal and political outlook. We went long precious and short USD on ceasefire day too. While markets have come a long way and risks clearly remain, our base case remains for an eventual resolution.
In equities, we are overweight. Earlier this month, we added an EM Asia overweight and cut our Japan underweight to our existing US overweight, moving equities overall back to overweight.
In sectors, we are long tech again. We upgrade tech (to overweight) and consumer discretionary (to neutral) and downgrade utilities (to neutral).
In rates, we stay overweight US real rates, now partly hedging with Gilts. We stay long TIPS. We added a Gilts underweight in smaller size, leaving us overall still bullish duration.
In credit, we are neutral. Earlier this month, we brought our underweight in US and EU IG back to neutral.
In commodities, we stay overweight precious. Earlier this month, we added a precious overweight. We stay neutral on energy and base metals.
In FX, we are short USD. Earlier this month, we added the unhedged version of the EM Asia equity index, leaving us short USD against emerging Asia.
In our illiquid corner, we add uranium.
