We continue to recommend an overweight allocation to equities relative to fixed income as near-term recession risks remain low. Global economic growth remains strong, and inflation is gradually picking up as labour markets continue to tighten. However, financial market volatility may creep higher as we approach the end of the business cycle. Accordingly, we continue to stress the importance of diversifying portfolios across multiple asset classes, including equities, fixed income and alternative investments. This week, all eyes will be on monetary policy decisions from the U.S. Federal Open Market Committee (FOMC) and the European Central Bank (ECB). The ECB is expected to take steps to address the widening gap between U.S. and European government bond yields (see chart below), which has triggered capital flows into U.S. bonds and out of their European counterparts. Potential market risks we intend to monitor as we head into the second half of the calendar year include political developments in Europe (Italy and Spain) and Latin America (Brazil and Mexico) and emerging markets’ rising debt levels.