During the past quarter we increased our equity overweight and further reduced fixed income. As the market digests concerns over the Omicron variant, we remain confident in the efficacy of vaccines. We note that vaccine makers have expected new variants months before the appearance of Omicron as it is normal for viruses to mutate. BioNTech and Pfizer have said they can adapt their vaccine within 6 weeks to new variants, and AstraZeneca said their vaccine platform enables a quick response to mutations as they emerge. We continue to hold the view that the reopening of developed economies with high vaccination rates is delayed but not derailed. Consumer spending, greater economic activity and higher inflation likely lead to higher rates in 2022, positioning high beta short duration assets for outperformance. We expect credit to outperform duration, and value to outperform growth in the first quarter as Omicron fears recede. Elevated inflation throughout 2021 contributed to hawkish rhetoric by the Federal Reserve. While we believe that the Fed will not be overly hawkish due to the “Taper Tantrum” episode of 2013, persistent inflation heightens concerns of a policy mistake and is a key risk for 2022.

We discuss our outlook and the factors we see as key to drive markets going forward below :