CENTRAL & ALTERNATIVE SCENARIOS (12 TO 18 MONTHS HORIZON)
We are maintaining the narrative and the probabilities of the scenarios. The central scenario assumes that the policy mix and improving fundamentals will support the recovery and the markets. Beyond 18 months, we expect US growth to revert to potential amidst a higher inflation regime, while stagflationary pressures rise, in particular across Europe. As valuations are stretched and economic momentum is fading, equities’ expected risk-adjusted return of equities is diminishing. We now consider vaccine-resistant virus variants or vaccination-related issues as a risk to the central scenario.