• Latest economic datapoints reflect a weaker growth narrative that is getting louder among financial participants. In the US, latest consumer confidence and retail sales were weak, and the latest jobs report for August indicated much lower job creation than expected in the month. In China, manufacturing and service data also came in weaker than expected. Not surprisingly, markets have responded in a defensive fashion, with cyclicals no longer outperforming defensives in recent weeks. This continued last week.

• However, a deeper look at the data tells us a different story. The August US ISM Manufacturing survey – generally a strong leading indicator - was higher than last month and beat expectations, with new orders and inventories up. And the report spoke about how supply chain bottlenecks are impacting the economy. We see these problems as transitory, not structural.

• We have already responded to the slower pace of growth by reducing our equity exposure last month, but we remain positive about continuing growth. Our recent additions in Financials and Industrials reflect this, and we are looking at Consumer as well. As the vaccination rollout continues, we think the Delta wave passes and indeed may have already peaked. Income levels still remain well above spending levels and the Central Banks are not tightening policy anytime soon.