Sector & Equity Compass - Uncertainty Demands Diversification

Compared with previous quarters this year, which could have been termed “recovery” or “reflation” or “passing the baton from US to Europe,” the coming quarter looks more difficult to predict. We continue to believe that equities in general are supported by earnings forecasts, driven by continued reopening, and investors are still willing to buy any dip but are increasingly mindful of risks to growth and sentiment. Among the factors we are now taking into account are exposure to China (while still an engine of growth for many markets, it is increasingly a source of regulatory risk), rising input costs and the speed of tapering.