Investment Rating - The report maintains a tactical Neutral (N) rating for equities over a 3-month horizon and an Overweight (OW) rating for equities over a 12-month horizon [5][9]. Core Insights - The current market sentiment has shifted towards a 'Goldilocks' narrative, characterized by a resilient macro backdrop and expectations of dovish monetary policy, despite potential headwinds from tariffs and a mixed growth/inflation outlook [4][15]. - The report identifies three potential risks ('bears') for the second half of the year: a significant negative growth shock, a large rate shock affecting long-duration bonds, and a deepening bear market for the Dollar [5][62]. - There is an emphasis on diversification across asset classes and regions, with specific recommendations for shorter-duration bonds, low volatility stocks, infrastructure, Gold, financials, and selective emerging market exposure [5][63]. Summary by Sections Market Sentiment and Risk Appetite - The Risk Appetite Indicator (RAI) has rebounded to somewhat bullish levels after a rapid re-risking phase, indicating a shift in investor sentiment towards riskier assets [4][27]. - Despite the bullish sentiment, the report warns of elevated valuations and a modestly negative asymmetry for equities in the near term, suggesting a higher probability of drawdowns compared to rallies [47][52]. Asset Allocation Strategy - The report recommends a tactical asset allocation of Overweight in cash and equities, Neutral in bonds and credit, and Underweight in commodities for the next 3 months [5][7]. - For the 12-month horizon, the strategy remains Overweight in equities and Neutral in cash, credit, and bonds, while continuing to Underweight commodities [5][7]. Economic Outlook - The macroeconomic environment is expected to face challenges in the second half of the year, with a deteriorating growth/inflation mix primarily driven by tariff impacts [15][67]. - The report highlights that while hard data has shown some negative surprises, the labor market remains resilient, and inflation pressures have not significantly materialized [19][67]. Sector and Asset Class Insights - The report suggests that equities may face headwinds from potential tariff impacts and a slowdown in corporate profitability, particularly in the US [66][71]. - Gold is highlighted as a key safe haven asset, with price forecasts raised to $3,700 per ounce by the end of 2025, supported by strong central bank buying [13][71]. Diversification Opportunities - The report emphasizes the importance of diversification in multi-asset portfolios, particularly in light of the current market dynamics and potential risks [58][62]. - Specific diversification strategies include focusing on shorter-duration bonds, quality stocks, and safe-haven assets like Gold and the Swiss Franc [71][82].

Investment Rating - The report does not explicitly provide an investment rating for the industry. Core Insights - The interplay of policy uncertainty and business cycle dynamics is crucial, with significant influences from US policy shifts in trade, immigration, fiscal, and regulatory domains affecting market sentiment [9]. - The complexity and uncertainty surrounding the global macroeconomic landscape are expected to persist in the second half of 2025, with various potential scenarios outlined for market performance [12][15]. - A US recession is not the baseline scenario, but risks remain elevated, with a potential for 100 basis points of Fed cuts between December 2025 and spring 2026 [15][24]. Summary by Sections Economic Outlook - The substantial shift in US trade policy has led to a forecasted downshift in global growth and a rotation in inflation pressures towards the US, with recession risks placed at 40% [17]. - The US GDP growth outlook has been revised down from 2.0% to 1.3% for the year, with core PCE inflation expected to reach 4.6% in Q3 and 3.4% by year-end [21]. Equities - The outlook for US equities suggests narrow market leadership and high concentration, with a potential for new highs absent major policy or geopolitical surprises [25][26]. - International equities are expected to trade favorably, with a rotation into international markets likely to continue, supported by USD weakness [26][27]. Rates - Long-end yields are expected to remain stable, with a forecast for 2-year and 10-year yields to end the year at 3.50% and 4.35%, respectively [30][31]. - The Treasury market's rapid growth has outstripped demand, leading to a potential increase in term premium over time [30]. Credit - High-grade credit remains supported by high yields and good corporate earnings, with spreads expected to remain tight [35][36]. - High-yield bond spreads are forecasted to widen by about 100 basis points to 450 basis points by year-end 2025, with a default rate expected to rise to 2.75% in 2026 [38][39]. Commodities - Oil prices are anticipated to trade in the low-to-mid $60 range for the remainder of 2025, with geopolitical tensions potentially causing short-term spikes [43][44]. - Gold prices are projected to reach an average of $3,675 per ounce by Q4 2025, supported by strong demand amid economic uncertainties [45].