Investment Rating - The report provides a detailed forecast for various asset classes, indicating a bearish outlook for equities and a mixed sentiment for fixed income and commodities [2]. Core Insights - The report highlights significant declines in equity indices, with the S&P 500 expected to drop by 20.7% in a bear scenario, while the MSCI Europe is projected to decline by 22.3% [2]. - The report notes that the AAII survey for Net Bulls has reached a six-month high, indicating a potential shift in market sentiment [6]. - US Quality metrics have fallen to their lowest levels since 2001, suggesting deteriorating market conditions [6][9]. Summary by Sections Equities - S&P 500 forecasted returns range from 4,900 to 7,200, with a base case return of 4.7% [2]. - MSCI Europe shows a similar trend with a forecast range of 1,610 to 2,620 and a base case return of 7.3% [2]. - Topix is projected to decline by 23.3% in a bear scenario, with a base case return of 5.0% [2]. Fixed Income - UST 10-year yields are forecasted to range from 2.85% to 4.35%, with a base case return of 12.1% [2]. - US Investment Grade (IG) credit is expected to yield excess returns of -0.1% in a bear scenario [2]. Commodities - Brent crude oil is projected to have a bear case return of -23.6%, with a base case return of -8.3% [2]. - Gold is expected to decline by 20.6% in a bear scenario, with a base case return of -6.5% [2]. Market Sentiment - The Market Sentiment Indicator (MSI) reflects a negative sentiment shift, with various indicators showing increased volatility and negative positioning [55][62]. - The report indicates a significant divergence in positioning among asset managers, hedge funds, and dealers across different markets [62]. Cross-Asset Correlations - The report notes that cross-asset correlations have increased, with equities showing a correlation of 71% and credit at 82% [73]. - The correlation between equity and rates is notably negative at -7%, indicating a potential decoupling of these asset classes [73].

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].