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What's Driving Markets? Thumbnail

What's Driving Markets?


The sour Fed growth view is not dour enough.

Market insights from our partners at BlackRock.

Central bank conundrum

Many central banks aren’t acknowledging the extent of recession needed to rapidly reduce inflation. Markets haven’t priced that so we shun most stocks.

Market backdrop

Yields surged after more rate hikes and the UK’s fiscal splurge news. We cut UK gilts to underweight as we see higher rates and fiscal credibility questions.

Week ahead

U.S. and euro area inflation are likely to show persistence in data this week. We think central banks underestimate the cost of bringing it down to target quickly.

Many central banks, like the Fed, are still solely focused on pressure to quickly get core inflation back to 2% without fully acknowledging how much economic pain it will take in a world shaped by production constraints. Case in point: last week’s rate-hike blitz. This all implies a clear sequence: overtighten policy first, significant economic damage second and then signs of inflation easing only many months later. We’re tactically underweight developed market (DM) stocks and prefer credit.

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