NN IP: Reflation theme more pronounced in global equities

NN IP: Reflation theme more pronounced in global equities

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  • Bond yields continue to rise amid higher inflation expectations and growing confidence in a strong global recovery
  • Improving pandemic-related news and continued fiscal stimulus should further accelerate growth momentum
  • We doubled our oil overweight and introduced an overweight in value versus growth stocks

Increasing confidence in a strong global recovery continues to push bond yields higher. Recent economic data reflect decent growth momentum, which can only improve if the positive trend in coronavirus vaccinations continues. Policymakers, especially in the US, will continue to provide new stimulus that should further boost growth in the activity normalization phase. So far, higher inflation expectations are the primary driver behind the rise in bond yields. Monetary policy expectations have also moved, but remain well anchored for the coming years. Risky assets
have held up well on aggregate. The most pronounced moves have been in equities, where cyclical sectors are outperforming defensives and value stocks are outpacing growth stocks.

In our multi-asset model portfolio, we retain our pro-cyclical, risk-on stance with overweights in equities and high-yield credit and a large underweight in US Treasuries. We increased our cyclical exposure by doubling the size of our oil overweight.

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