Asset		Tactical view	Commentary
Equities
United States			We are overweight given our positive view on the AI theme. Valuations for AI beneficiaries are supported as tech companies keep beating high earnings expectations. We think upbeat sentiment can broaden out. Falling inflation is easing pressure on corporate profit margins.
Europe			We are underweight. Valuations are looking more attractive. A pickup in growth and European Central Bank rate cuts support an ongoing earnings recovery.
U.K.			We are overweight. Political stability and a growth pickup could improve investor sentiment, lifting the UK's low valuation relative to other DM stock markets.
Japan			We are overweight. Mild inflation and shareholder-friendly reforms are positives. We see the BOJ normalizing policy – not tightening aggressively. A weak yen is a drag on returns for international investors.
Emerging markets			We are neutral. The growth and earnings outlook is mixed. We see valuations for India and Taiwan looking high.
China			We are neutral. We see risks from weak consumer spending, even with measured policy support. An aging population and geopolitical risks are structural challenges.
Fixed income
Short U.S. Treasuries			We are overweight. We prefer short-term government bonds for income as interest rates stay higher for longer.
Long U.S. Treasuries			We are neutral. Markets have cut expectations of Fed rate cuts and term premium is close to zero. We think yields will keep swinging in both directions on new economic data.
Global inflation-linked bonds			We are neutral. We see higher medium-term inflation, but cooling inflation and growth may matter more near term.
Euro area government bonds			We are neutral. Market pricing reflects policy rates in line with our expectations and 10-year yields are off their highs. Political developments remain a risk to fiscal sustainability.
UK Gilts			We are neutral. Gilt yields have tightened to U.S. Treasuries and market pricing of future yields is in line with our view.
Japan government bonds			We are underweight. Stock returns look more attractive to us. We see some of the least attractive returns in JGBs.
China government bonds			We are neutral. Bonds are supported by looser policy. Yet we find yields more attractive in short-term DM paper.
U.S. agency MBS			We are neutral. We see agency MBS as a high-quality exposure in a diversified bond allocation and prefer it to IG.
Short-term IG credit			We are overweight. Short-term bonds better compensate for interest rate risk. We prefer Europe over the U.S.
Long-term IG credit			We are underweight. Spreads are tight, so we prefer taking risk in equities from a whole portfolio perspective. We prefer Europe over the U.S.
Global high yield			We are neutral. Spreads are tight, but the total income makes it more attractive than IG. We prefer Europe.
Asia credit			We are neutral. We don’t find valuations compelling enough to turn more positive.
Emerging market - hard currency			We are neutral. The asset class has performed well due to its quality, attractive yields and EM central bank rate cuts. We think those rate cuts may soon be paused.
Emerging market - local currency			We are neutral. Yields have fallen closer to U.S. Treasury yields, and EM central banks look to be turning more cautious after cutting policy rates sharply.

Asset	Tactical view	Commentary
Equities
Europe ex UK		We are underweight relative to the U.S. and Japan – our preferred markets. Valuations are looking more attractive. A pickup in growth and European Central Bank rate cuts support an ongoing earnings recovery.
Germany		We are neutral. Valuations and earnings momentum are supportive relative to peers. The earnings outlook looks set to brighten as global manufacturing activity bottoms out and financing conditions start to ease.
France		We are underweight given modestly supportive valuations. While only about a minor share of French blue chips' revenues and operations are directly tied to domestic activity, investors will likely pay attention to any shifts in the business conditions for French domestic and multinational firms following the snap elections.
Italy		We are underweight. Valuations dynamics are supportive relative to peers, but recent growth and earnings outperformance seems largely due to significant fiscal stimulus in 2022-2023 that cannot be sustained over the next few years.
Spain		We are neutral. Valuations and earnings momentum are supportive relative to peers. The utilities sector looks set to benefit from an improving economic backdrop and advances in AI. Political uncertainty remains a potential risk.
Netherlands		We are underweight. The Dutch stock markets' tilt to technology and semiconductors, a key beneficiary of higher demand for AI, is offset by relatively less favorable valuations and earnings outlook than their European peers.
Switzerland		We are underweight, in line with our broad European market positioning. The earnings outlook has brightened, but valuations remain high versus peers. The index’s defensive tilt will likely be less supported as long as global risk appetite holds up, we think. We keep an eye on how their earnings outlook evolves from here.
UK		We are overweight. Political stability and a growth pickup could improve investor sentiment, lifting the UK's low valuation relative to other DM stock markets.
Fixed income
Euro area government bonds		We are neutral. Market pricing reflects policy rates broadly in line with our expectations and 10-year yields are off their highs. Political developments remain a risk to fiscal sustainability.
German bunds		We are neutral. Market pricing reflects policy rates broadly in line with our expectations and 10-year yields are off their highs.
French OATs		We are neutral. The European Union has already warned France for breaching fiscal rules and its sovereign credit rating was downgraded earlier this year. Post elections, elevated political uncertainty given risks to fiscal consolidation and a slower pace of structural reforms remain challenges.
Italian BTPs		We are neutral. The spread over German Bunds looks tight against a trajectory for the debt-GDP ratio in the next few years which is stable at best. Other domestic factors remain supportive, with growth holding up quite well relative to the rest of the euro area and Italian households showing a significant willingness to increase their direct holding of BTPs in an environment of high nominal rates and yields.
UK gilts		We are neutral. Gilt yields have tightened to U.S. Treasuries and market pricing of future yields is in line with our view.
Swiss government bonds		We are neutral. The Swiss National Bank has cut policy rates twice this year due to reduced inflationary pressure. But it is unlikely to cut rates much further from here.
European inflation-linked bonds		We are neutral. We see higher medium-term inflation, but cooling inflation may matter more near term. Breakevens came down further on the short end, following the lower May and June inflation data, making European inflation-linked bonds less attractive.
European investment grade credit		We are neutral European investment grade credit, with a preference for short- to medium-term, high-quality pockets because of their income role in portfolios. We maintain our regional preference for European investment grade over the U.S. given more attractive valuations amid decent income.
European high yield		We are overweight. We find the income potential attractive. We still prefer European high yield given its more appealing valuations, higher quality and lower duration than in the U.S. Spreads compensate for risks of a potential pick-up in defaults, in our view.

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