Investment Rating - The report maintains an "Overweight" (OW) position on cash, equities, credit, and bonds, while being "Underweight" (UW) on commodities for the next three months [3][21]. Core Insights - Emerging Market (EM) equities have shown resilience despite tariff uncertainties, with a projected earnings growth of 10% to 11% for CY 2025/26, which is 2-3 percentage points higher than previous forecasts [2][6]. - The S&P 500 had its best May performance since 1990, outperforming EM equities year-to-date, although EM equities have generally outperformed US equities in the same period [2][7]. - A weaker US Dollar is expected to support EM outperformance, as EM equities have historically benefited from a weaker Dollar [2][14]. Summary by Sections Economic Outlook - The report highlights the importance of upcoming economic data and decisions from G4 central banks, with expectations of a 25 basis point rate cut by the ECB and stable unemployment rates in the US [1][2]. Market Performance - The S&P 500's performance in May 2025 was notably strong, while EM equities have shown positive macro surprises, contrasting with muted US macro surprises [2][9]. Asset Allocation - The report suggests a diversified approach, advocating for international diversification in equities and bonds, and highlights the potential benefits of EM equity and local rates [3][6][21]. Correlation Analysis - The correlation between MSCI EM and the US Dollar has turned more positive, indicating a decoupling of EM rates from US rates, which may provide investment opportunities [16][18].

Core Insights - Philip Morris International (PM) has shown significant growth, with shares increasing over 100% since the second quarter of 2024, driven by new nicotine brands replacing traditional cigarettes [1] - The company is well-positioned for dividend growth over the next decade, supported by strong cash flow from its legacy cigarette business and expanding smoke-free product lines [2][8] Group 1: Company Overview - Philip Morris International operates as a leading tobacco company focused on international markets, distinct from Altria Group, which sells domestically [3] - The company benefits from international diversification, with revenue primarily generated outside the U.S., providing a hedge against dollar devaluation [4] Group 2: Product Innovation and Revenue Growth - Major investments in non-cigarette products have led to substantial growth, particularly with the nicotine pouch brand Zyn, which has grown to over 200 million cans sold per quarter in the U.S. [5] - The Iqos heat-not-burn device is a market leader in Europe and Japan, contributing significantly to revenue, with 42% of total revenue now coming from smoke-free products, totaling $38.4 billion over the last 12 months [6] Group 3: Dividend Strategy - Philip Morris pays a dividend of $5.35 per share, supported by free cash flow of $6.55 per share, despite current cash flow being impacted by investments in growth [10] - The company anticipates a rise in free cash flow per share to $10 or higher over the next five years, allowing for a projected 10% annual dividend growth, potentially increasing the payout to $8.61 [11] Group 4: Investment Potential - Despite a 100% increase in stock price over the past year, Philip Morris International remains an attractive investment, with a forward P/E ratio of 24, indicating it is not overly expensive for a consistent earnings grower [13][14] - The company holds a dominant position in the growing nicotine market without tobacco, positioning it favorably against competitors [14][15]