If you’re wondering where the economy and markets may be heading these days, here are some things to know:
Are housing costs still rising rapidly? If we look at the CPI (Consumer Price Index) figures, shelter inflation remains sticky. But that could be due to the way they measure prices rather than actual pricing. CPI captures rent on both new and renewal leases. Renewal leases are still catching up to market rates, pushing the numbers higher month to month, even while new leases are already decelerating.
China comes back to the global table, hungry. As the China’s economy recuperates fully, more spending by the Chinese will likely help global GDP. Global growth could be boosted 1% in 2023 through increased demand for imported goods, especially from the Asia-Pacific region; foreign services, such as travel; and oil.
Speaking of inflation, supply chain improvements will most likely offset the inflationary influence of this renewed demand.
Watching every move you make, Fed. Based on strong GDP growth and persistent inflation, our Global Investment Research analysts now expect the Fed to announce three more 0.25% hikes this year, to reach an ultimate Fed funds target rate of 5.25%-5.50%.
To market, to market… The macro economy still has a part to play in equity pricing, but investors seem to be paying more attention to company specifics lately, meaning stocks are less likely to move in lockstep.
As for bonds, recent rate hikes and the expectation of more to come has some bond investors fearing 2023 will look like 2022. However, significantly higher starting yields this year may offset substantial risks of rate increases.
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