Recent weeks have seen global growth continue to push ahead in a robust and synchronised fashion. Similarly, and much as hoped, wage and inflation data have stepped back from their early-year acceleration, supporting our call that rising inflation pressures should come through only gradually. But in the words of Lord Baelish from Game of Thrones, "what we don't know is usually what gets us killed". Risk appetite has been ravaged, not by fear of more rapid central bank rate hikes, but by fear of an escalating global trade war.

Despite escalating tension, we expect the macro impacts of protectionist measures to date, and any future ones, will be contained. We believe our mid-cycle market call remains in play. As we've been highlighting, volatility was likely to be a feature this year. Indeed, we take this opportunity, with equity markets on the back foot and interest rates having retraced lower, to move further underweight fixed income (specifically high-yield credit). We retain our overweight to global equity markets (with an underweight to Australia).

We also take the opportunity to action our prose from prior months, where we've advocated seeking alternative investments in mid-cycle markets. This month we use our new underweight high-yield credit position to fund an overweight position in alternative assets. We also briefly revisit their investment thesis, canvasing the pros and cons of this style of asset and why we believe they deserve a decent allocation within a diversified portfolio.

Read our analysis here

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