Global macro momentum continues to surprise to the upside, most regions are posting significant year-over-year PMI improvements, and Central Bank bias is slowly shifting toward normalization. Yields have increased since June, and although the pace of monetary normalization is expected to remain gradual, we see further upside risk to bond yields.
Robust PMIs and a weaker U.S. dollar are currently translating into positive earnings visibility, thus supporting mid- teen gains for the MSCI AC World in 2017. Emerging market leadership (MSCI EM +25% YTD; LatAm +25%) is coherent with broad growth, Fed tightening, and rising yields. Canada, Brazil, and Chile are outperforming the S&P 500 since the first fed rate hike in December 2015, similar to behaviour experienced during the previous tightening cycle (2004-2006).