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:
Odds for soft-landing have risen, because of reduced inflation and consumers in good shape, but are not yet high enough for base case. Project mild recession starting in Q3. Rates to terminate at 5.25-5.5% and cuts to begin Q2 2024. Current valuations, e.g. growth stocks against blue chips, are unlikely to survive unscathed if US slides into recession or interest rates stay higher for longer than expected. Underweight Tech and seek less demanding growth stocks (healthcare and select industrials and consumer industries). S&P500 is a growth index and more concentrated by stocks and one sector than ever and is trading at a 15% premium to fair steady-state PE, the highest growth premium since 2002.
US near-term growth outlook upgraded and expected mild downturn pushed back to 2024. FOMC to deliver 25bp hike in next meeting. ECB to raise rates by 25bp, its last hike in this cycle amid cooling economy. Inflation and nominal wage growth underpin unchanged BoE call for 50bp August hike and final 25bp hike in September. 2023 and 2024 China GDP growth forecasts lowered to 4.9% and 4.0% on back of weaker than expected Q2 growth. Global growth slowdowns still weighing on Emerging Asia’s exports. Russia has suspended its grain deal participation, raising risks of slower disinflation, especially among poorer EEMEA countries. Majority of trade balances in Latin America are improving, reducing external vulnerabilities and moderating current account deficits.
Historically, the US economy dips into recession an average of 15 months after the yield curve inverts, which occurred in March 2022. However, projections have pushed recession call to early 2024. This case of recession delayed, not avoided, is due to the economy working through the aftereffects of historic pandemic liquidity in unpredictable ways. While 2023 GDP outlook boosted by 0.5%, outlook for 2024 reduced by 0.5%. This is because the risk of Fed over-tightening, to restore its inflation fighting credibility, has increased. 2023 China GDP growth estimate lowered to 5.1% from 5.7%.
* 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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