Whilst the headline indices held up in 2015, the drivers behind the US equity market have been weakening for sometime. Index levels have been pendant on flows into a concentrated number large cap technology growth shares and, outside these, supported by extraordinary levels of share buy-back activity. Meanwhile the model-dependent Fed is hawkish as long as employment numbers hold up. Should they do so, higher rates crimp equities but should they weaken, other aspects of the US economy will presumably be weakening in tandem. These are an unattractive set of payoffs and our core thesis now calls for a bear market in US equities. We have been reducing risk within portfolios and have moved to a more defensive position.

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