Global CIO video: "Next year will bring more moderate returns"

These renewed gains were driven primarily by a solid corporate earnings season, with still abundant liquidity conditions also playing a role. Even the Federal Reserve's tapering announcement and a forward adjustment of US rate hike expectations did not dent the upswing.

In hindsight, the Investment Committee's decision in early October to adopt a renewed overweight allocation to equities proved well timed. We maintain this overweight following our latest Investment Committee meeting, but note that investors should consider taking some profit after the strong run, as tactical indicators again suggest that investor sentiment has become more euphoric. Yet, the cyclical backdrop should remain favorable for equities, as we expect growth to stay robust and industrial production to strengthen in the coming months. Thus, momentum may well take the asset class further yet into next year, though returns are likely to be more moderate than in 2021. Overall, we maintain a cyclical tilt in our tactical allocation, favoring equity markets and sectors that should profit particularly strongly from ongoing reflation. Within fixed income, we retain an underweight in government bonds, as we expect yields to move higher amid the ongoing recovery.