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An unexpected equity rally in July seems to have been driven by upside surprises in US economic data and investors re-risking post Brexit.
Meanwhile, central banks have mostly disappointed markets but are keeping expectations high. In particular, confusion about BoJ policy has led to a strong selloff in JGBs.
We expect the Fed to hike in December, the BoE to follow a gradual easing path until year-end and the BoJ to underwhelm again after the comprehensive assessment in September. The ECB should deliver its asset purchase extension next month.
In this context, we remain underweight in equities and neutral in rates. We still prefer credit, supported by a global search for yield and strong technicals in Europe.
Source : AXA Real Estate
