Stability in markets is often self-reinforcing but as the cycle tops out we start to see divergences. We seem to be entering this phase. Not only is the breadth of global growth narrowing but we’re also seeing financial markets take opposing paths. Some emerging markets might appear to have fallen too far, but few of their idiosyncratic issues have been addressed and most are in the cross-hairs of global protectionism. We move to underweight global equities.

Rising bond yields might have forced the populist Italian government to moderate its tone ahead of next year’s budget, but it remains on the wrong path. We remain short BTPs.

Sweden’s general election should allow the anti-immigrant Sweden Democrats to take a further step forward. But the centrists will rally round to ensure the populists remain confined to opposition. The resulting decline in political risk, alongside quickening inflation and the start of tightening cycle by the Riksbank with autumn, should rekindle support for the Swedish krona. We’d be long SEK against a basket of euro and US dollar.