Risks are much more balanced now. US growth is fine, consumer stable with tax refunds coming, corporate fundamentals fine, labor market stabilizing. Significant downside risks from last year have dissipated, making further Fed cuts less pressing.

We think the dollar can still tactically weaken a little more from here given market positioning and tailwinds behind the American narrative. But ultimately we don't see it running away because US fundamentals are still strong, and we could see an upswing into the midterm elections.

This goes to the 'sell America, hedge America' conversation. There is some discontent, some dissatisfaction on US policy. Some diversification is being embraced. But ultimately clients still look at the breadth, depth, size of the US Treasury market and still want to be there.

It's a question of whether we still have that path to one or two more Fed cuts this year. That path is disinflation later this year, maybe with a new Fed chair. Inflation, growth is fine, but disinflation can continue. There is disinflation in the pipeline from rental, from tariff goods inflation peaking. In a K-shaped economy, corporate pricing power is limited. If growth is driven by an AI boost with productivity gains, the labor market can still rebalance, seeing downward pressure on wage growth while growth remains elevated. That's why bonds are still a good diversifier to have in your portfolio.