Spain

The reflation rally continues. Despite our bearish outlook for the year, we think the risks of the current rally lie to the upside given China's redoubling of stimulus at the expense of reform. Populist troubles are picking up in Europe, but we maintain our positive structural view and note that the migration crisis is slackening. Rather, the greatest risks of populism continue to flourish in the Anglo-Saxon world with Brexit and Trump.

The ECB's intended purchases of corporate bonds will not sustainably lift the asset-class. But we have found a compelling long-term opportunity in the sovereign bond market, and a way to hedge Brexit risk.

No significant change in allocation was made. Direction wise, weights in Spain and Switzerland were increased slightly at the expense of Netherland and Sweden.

This <i>Special Report</i> reviews all of our active recommendations, including our over/underweight country and asset allocation positions, as well as our current tactical trades.

For the month of February, the model underperformed both global and U.S. equities. For March, the model has modestly pared back its equity risk exposure, shifting the allocation into bonds. While Europe remains the largest equity overweight, EM and Canada also received some allocation. The U.S. and New Zealand were slightly downgraded. In the fixed-income space, the model is sticking with Italy and Spain.

Reduce portfolio duration to neutral, while also cutting exposure to European bonds (both in the core and Periphery) and Canadian government bonds.

An improvement in the euro area credit impulse is encouraging, but we explain why it is not enough to sustainably boost risk-assets.

Last month, the model outperformed both global and U.S. equities in local-currency and U.S.-dollar terms. For February, the model is aggressively increasing its risk exposure and has included a bet on commodities for the first time since 2012. For equities, the largest overweight remains Europe, but EM and Canada enjoyed significant upgrades. For bonds, the model favors the European periphery.

Central banks follow backward-looking indicators but economies follow forward-looking indicators. So which indicators should investors follow? And what is the current message? Also, we see signs that London is cooling.