The Economy

Selloff in risk assets appears technical to us. The power of low vol and zero return on cash has abated but its risk-bullish role is being taken over by improved growth and earnings. Fed rate normalization remains a far away threat. We stay long risk assets, but take more tactical risk in country allocations. Stay OW EM

·        Cross asset volatility

·        Fixed income

We see the HY selloff as technical and not fundamental. The now higher level of yields should lead to renewed strong demand once fund flows stabilize. We keep our small credit OW and remain focused on HY and EM

·        Equities

We think the selloff in energy is overdone and stay OW commodities, focused on energy and base metals. Open a long in the Brent Nov-14 vs. Feb-15 time spread as we expect the curve to return to backwardation over the coming few months