A relief rally, excess optimism overdone
We believe the Fed would keep rates in restrictive territory in the near term. This, coupled with concerns over earnings, allows us to stay cautious on risk assets but with select opportunities in US equities, businesses with strong balance sheets, and quality, value and dividend oriented stocks. In credit, some US IG and EM debt appear attractive. However, investors should include protection in portfolios in the form of USTs on which we are more positive now. This approach should be complemented with an overall well-diversified stance that includes commodities.