Fundamentals and technicals have remained supportive for risk assets since Q2/16, and our asset mix model has been sending large equity overweight (OW) signals. Since June 2016, the S&P 500 is outperforming bonds by over 16%. Although the equity OW signal from our model remains intact and macro fundamentals are still supportive, we expect the equity “advantage” to fade in 2H/17.
Recommended Asset Mix. We are sticking to an equity over bond preference, but we are reducing our U.S. equity exposure by 3%. Cash (+1%), EAFE (+1%), and EM (+1%) move up. Within the Americas, we continue to prefer LatAm/Canada over the U.S.