After a strong rally in November, risky assets experienced some consolidation in December, mainly driven by hawkish central banks and higher rates. The month was dominated by macro events, with no shortage of catalysts to move the market between CPIs and NFPs and between the Fed, the ECB and the surprise decision from the BOJ to widen the YCC by 25 basis points. Overall, central banks maintained their hawkish stance despite improving inflation data in the US and falling energy prices in Europe. On the micro front, the month was relatively quiet as most companies had already reported Q3 numbers. We expect fundamentals to continue to hold up though some deterioration is expected, as guidance is either being revised downwards or removed, and the level of dispersion is increasing. Technicals remain strong, as fund flows turned positive and supply on the primary market remains limited. We have already seen an elevated level of rising stars (higher than fallen angels), and we expect that this will be less frequent in 2023. In December, the strategy performed in line with its benchmark and maintained its strong outperformance YTD. In the current environment, we remain focused on leading players with strong pricing power and a proven ability to pass through inflation costs. We favour issuers with prudent capital management and credit friendly behaviour. We remain OW on healthcare/pharma and telcos (with a focus on companies with no refinancing risk in a rising rate environment). We reduced our UW to US retailers that now have more attractive valuations. We maintain our underweight exposure to cyclicals (autos, chemicals). In terms of geography, we continue to focus on US companies and global players among European issuers. We still hold an OW on Euro High Yield Hybrids (with a focus on IG issuers). For US issuers, we favour euro-denominated issues, given valuations. For European names, we favour USD-denominated bonds, as US investors tend to focus on homeland issuers, making valuations more attractive in dollars. In this context, we continue to maintain our cautious stance on High Yield markets, given where we are in the credit cycle and the high level of uncertainty on the macro front. However, we are starting to be more constructive on defensive sectors (telecoms, healthcare) and high-quality credit (with a relatively higher allocation to investment grade names that we include in our diversification bucket), where the combination of wider spreads and very low cash prices (70-80s) creates an attractive investment opportunity with an asymmetric profile over the medium term. Also, historically high yields bode well for forward HY returns. In the short term, we expect credit dispersion to increase and the strategy to benefit from this environment to generate alpha.