Monthly House Views - A decidedly Atypical Cycle - June 2023

Resilience of developed economies confirmed. As they bounce back fromsome highly specific economic shocks (Covid, Ukraine war), developed economies continue along their decidedly atypical cycle. The inflationary and
monetary tightening brakes are on, but they are still being countered by the strong finances of households and companies. Activity is conspicuously booming in services, sustaining the improvement in labour markets. In
these circumstances, we are maintaining our outlook of modest growth for developed economies during the rest of the year. On the other hand, we are trimming back our forecast for recovery by the Chinese economy, which,
having reopened, is taking longer than expected to get out of the blocks.

Central banks near peak but not ready to pivot. Perhaps themore specific aspect of this cycle is the inflationary surge and record monetary policy clampdown to deal with it. Today, central banks may be close to the end of
their tightening phase. But it looks premature to start easing, despite what markets seem to be pricing in. Inflation should fall quickly in terms of production prices, but underlying inflation will prove a stickier proposition
with labourmarkets still solid.

We maintain our strategic balance between equities and bonds while taking on slightly more risk. In equities, we are raising exposure to the USmarket given the resilience of the economy and the expected pause in
the rate hike cycle. But we are not dropping our regional differentiation, remaining Overweight to European equities which continue to benefit form a more favourable earnings dynamic. We are reducing our position in
emerging equities due to the more moderate recovery in China, and we are reducing gold, cashing in on our Overweight which has lasted several quarters. Our highly diversified global positioning offers some protection
against resurgent market turbulence while our ongoing Overweights to some bond markets are earning us some nice yield income.

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