In brief:

We believe an apparent imbalance between the supply and demand of US government debt could lead to higher long-term interest rates regardless of the inflation path. For defensive allocations, we prefer Australian long-term bonds over the US equivalent.

We believe the key drivers of Australian inflation are largely outside of the Reserve Bank of Australia’s influence, meaning it is uncertain whether they will keep raising interest rates. This keeps us neutral on Australian Equities.

The persistent underperformance of China’s equity market has extended to where we now believe the balance of outcomes justifies removing our underweight call to Emerging Markets.

We believe the general interest rate environment will be flat, with the potential for higher interest rates in the near term. This environment has historically been challenging for interest rate-sensitive equities.

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