US resilience

Just noting the fund commentary from PTM, who had been positioned for a US recession that didn’t come.

They’ve pulled back on their shorts, lifting the net equitised exposure some 15 percentage points or so, and essentially join the chorus of strategists upgrading their US outlook (Morgan Stanely’s Mike Wilson was the highest profile bear on the sell-side) after the data simply refused to fall over.

We think US equity risk premia are quite slim, and the ex-ante outlook for US equities relative to bonds is not especially compelling.

Equally, the economic performance is truly differentiated from the rest of the world, which looks much weaker. Hence the premium you pay (alternatively, the cheap PEs of everywhere else).

We have an underweight to US equities, across the international portfolio (a bit over 60%, compared to benchmark weight which is closer to 70%), and instead simply prefer to spread the capital far and wide.

The overall weight to international sits at around our SAA weight, the main UW we have in equities is to Australia, where things look less robust, but not cheaply priced, either.

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