Fixed Income Analysis /

Cross Asset Allocation - Easing volatility to support risk appetite

    Christian Stocker
    Stefan Kolek
    Chiara Cremonesi
    9 April 2021
    Published byUniCredit
    • Market sentiment has improved and implied volatility levels paint a more relaxed picture. The level of uncertainty regarding COVID-19-related developments and their impact on economic activity remains elevated, but risks seem balanced; and while the positive picture is reflected in record-high equity indices levels, market optimists might gain the upper hand as profit expectations are upgraded. While the hunt for yield continues and carry is still attractive in selected EM and high-yield credit, duration risk has not disappeared.
    • We recommend a moderately overweight position on EU and EM stocks and a neutral position on US stocks. Across fixed income, we are underweight on US Treasuries, moderately underweight on Bunds and neutral on EU credit, while we retain a positive stance on EM credit. We remain neutral on commodities.