Hello everybody and welcome back to our weekly Portfolio Watch!

The world has seen significant changes since the last release of Portfolio Watch, marked by the tragic events in the Middle East. To add some context, it is perhaps helpful to refresh the six key takeaways before the Hamas incursion into Israel on Saturday:

1) We are on the sideline on Bonds but it is starting to look juicy 2) Yield curve steepener is good risk reward 3) We’re bearish on equities 4) We don’t wanna bet against the USD 5) Credit spreads are bound to widen  6) We think banks are starting to look detached from fundamentals

1) and 2) have clearly suffered a bit on the “route to safety” reaction. But interestingly equities have held up reasonably well:

Chart 1: Equity returns