Summary

1.Gunboat Capitalism – The year started well for equities as the overall backdrop remained constructive. The recent geopolitical events are likely to create fresh bouts of volatility as the US seem to be increasingly embracing a “law of the jungle” approach.

2. We remain on course – Unless our base case of solid economic growth is derailed, we remain pro- risk, overweighting equities while maintaining our regional calls.

3. Corrections are normal – During the last 50 years, the average intra-year drawdown for the S&P exceeded 18% while the average year still returned ~ 12.8% (Chart 5). Thus, the potential occurrence of a meaningful correction exceeding 10% could rather represent an opportunity to deploy cash than to panic.

4. Sectors - Our key global (and US) sector recommendations remain Energy infrastructure, Mining, Utilities and those innovative industries that should quickly profit from implementing AI, such as the Biotech industry and other innovative Health care companies. Certain Industrials and Financials are also expected to do well.

5. Banks – still attractive: After recent gains, we believe investors should maintain exposure to the sector but with greater selectivity. The focus should be on solid banks that have lagged in the market rally and those catching growth opportunities. Embrace pullbacks to increase exposure.