Individual investors are often bombarded with specific stock calls and targets.
However, we believe you can get a better medium to long term perspective by considering asset class, sector, thematic and macro economic views.
To help you, every week, we pour through the research produced by some of the larger institutions, and summarize their market thoughts.
Below are this week’s 3 updates:
Recession projection unchanged, central banks must keep policy tight to fight inflationary pressures. Expect further earnings pain; although 2023 consensus estimates cut, remain above our expectation. EM favoured because of brighter macro backdrop, even as China’s restart sputters, specifically Mexico for quality tilt and Brazil for exceptional carry from still-high bond yields. Five big structural forces transcending the macro backdrop: digital disruption and AI, geopolitical fragmentation, the low-carbon transition, aging populations and the future of finance. Semiconductor industry powering AI key part of EM technology sector.
12-monthUS recession probability at 25%, lowered previously from 35%, whereas consensus still sees over 60% likelihood. 0.25% Fed hike in July, with at least one more to follow, but entering final stages of tightening policy. PCE inflation forecast at high threes by end of 2023, low to mid twos by end of 2024, and only 2% in 2025. BoE to terminate rates at 5.5%, but market currently pricing in above 6%. Expect ECB rates to terminate at 4% (in line with market).
US recession risk rising. Although outlook that further tightening is not necessary, Fed clear in their need for further decelerating inflation. Median FOMC member anticipating tow further hikes this year. Analyst estimates for earnings likely remain too high, thus hard to be bullish on equities. As inflation recedes, expect stock-bond correlation to decline, adding more support to balanced portfolios of bonds and stocks. Likelihood of UK hard landing heightened, central forecast of 5.75% by November, but downside risk remains with BoE pushing rates to 7%.
* Please note these are not the thoughts or analysis of illio but the respective institutions. We have summarized what we believe are key points. We assumes no responsibility or liability for any errors or omissions in the content of this site. The information contained herein is not intended to be a source of advice and the information contained in this website does not constitute investment advice.
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