TACO, FOMO, consolidation : Our weekly cross-asset views

As the world swings between hopes for a deal and uncertainty about its timing, equity markets have clearly chosen the optimistic path. US indices have reached new all-time highs this week, driven by a tech rally, a generally positive start to the earnings season, but above all by a very strong FOMO (Fear Of Missing Out). The major world equity benchmarks have now virtually erased the entire Iran-war shock. This is also true for HY credit and EM spreads which have remained immune to the global environment of rising rates and rising risks.The complacency also extends, in our view, to long-run inflation risks. We notably see an anomaly in the very muted reaction of agricultural commodities, especially since we believe that food inflation would likely be the next step before we switch to core inflation concerns.This observation suggests that markets may peak in the short term, provided that negotiations do not make further progress. In the absence of positive developments, and as long as macro uncertainty persists, we believe one should alternate between hedging (when markets appear toppish) and buying the dip.