Resilience
The ‘R’ word, namely a global recession led by the US, and when, and if it arrives, continues to dominate the market narrative. Against the backdrop of the fastest and most dramatic rise in US interest rates of any cycle since 1980, many had forecasted another annus horribilis for risk assets in 2023. Yet major headline equity indices continued to melt up in the second quarter, whilst credit markets remain remarkably well behaved thus far. What gives?
Sentiment was lifted by a (convoluted) resolution to the US debt ceiling debacle and subsiding fears regarding the health and outlook for the US regional banking sector following the Silicon Valley Bank (SVB) implosion in March, but the remarkable resilience displayed by the economy and a strong dose of Artificial Intelligence (AI) hype were the chief protagonists in powering equities higher over the period.
Bulging wallets
Simply put, consumer wallets, still bulging from the extraordinary monetary and fiscal policies introduced in response to the COVID enforced lockdown, have had the effect of elongating the current economic cycle, with a slew of recent economic data releases forcing analysts to push out ‘imminent’ recessionary forecasts to the second half of 2023, sometime in 2024, or beyond.
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