Reports of 60/40’s Death are Greatly Exaggerated - Feb. Macro Snapshot

Our Macro Regime model is still neutral on the risk asset outlook, but leading indicators show volatility is biased higher. This necessitates adding portfolio resilience; we still think bonds will provide downside protection in portfolios in absolute terms and relative to equities, with high real-yields creating an attractive entry point on TIPS.

• Neutral VP Macro Regime, but volatility leading indicator still rising
• Sticky but stable inflation means buy bonds as yields move towards 5%
• 1984/95 analogy: bonds attractive relative to equities
• US EPS growth priced in, focus on quality & duration plays
• Still bullish China tech, uncorrelated to highly-valued US tech
• Real yields nearing ceiling means attractive entry point for TIPS
• Bullish tactical and cyclical set up for metals and mining
• USD rally tapped out in theory, but Trump agenda bullish in practice