Summary "With the global e Economy The successful formation of a Greek government after the June 17 elections has reduced economy the risk of an imminent Greek exit from the Eurozone. However, the Euro debt crisis continuing to persists, and further reform and consolidation efforts in Spain and Italy are needed. In the US, economic data weakened recently, but it remains in line with our forecast of moderate muddle through, growth of around 2% in 2012. The Fed extended "Operation Twist" until the end of the . year and is ready to do more if the economic situation deteriorates materially. Meanwhile, we believe that Chinese activity data is showing signs of stabilization and inflation remains low. We expect US corporate the Chinese economy to gradually pick up in the second half of 2012. bonds offer the » Equities _. . ; Despite our relatively positive outlook for US and Chinese economic growth, ongoing best risk return." Eurozone issues keep us neutral on global equities. We think US companies are better positioned than their European peers, and thus keep our longer-standing preference for US equities. US earnings are relatively robust and the recovery of the domestic economy continues to support revenues. Furthermore, we keep a moderate overweight in emerging market (EM) equities as valuations are attractive and we expect growth to accelerate in the second half of the year. In the near term EM currency weakness remains a risk factor. e Fixed Income High grade government bond yields remain extremely low due to ultra-expansive monetary policy and ongoing investor concerns over global growth. While we expect yields to only rise very gradually in the near term, we continue to see better investment opportunities in other fixed income segments. US high yield remains our favorite asset class, given attractive valuations and a favorable default outlook. We also keep our overweight recommendations on investment grade and EM bonds. e Commodities We avoid broad commodity exposu