A volatile quarter, with markets at all-time highs, whilst leading indicators remain weak. Unusually, a super-sized rate cut from the Fed, in the absence of a crisis, can be read in one of two ways:
A commitment to achieving a soft-landing
Deepening concerns of weakness in the labour market
This quarterly unpacks:
The volatile quarter that was
China's economic malaise
A run through of leading US labour market indicators
The case for a soft-landing
A focus on Australia and the outsized role of Government spending
Investment comments and positioning.
Please reach out with any questions or comments.
With upside inflation risk lower, and interest rates restrictive, recession risk for late 2024 or early 2025 has increased. The c.55% recession probability from our last quarterly has grown to c.70%.
In the event of recession, Monetary Policy has the ammunition to respond. Investors who protect capital leading into the next recession, should be prepared to pivot when opportunities arise.
The final quarter of 2023 saw markets firm on a soft landing outcome, with a rally in equities and a pricing of interest rate cuts in 2024. Disinflationary forces have seen Central Banks make remarkable progress in returning inflation back towards target. Might this be the goldilocks outcome Central Bankers hoped for and #markets thought impossible just 12 months ago?
This Quarterly discusses the two competing economic scenarios and the key data points that help inform our views on the outlook for 2024. We finish off with a run down on investment positioning, pockets of potential value and our favourite graph from 2023.
#Investment #markets appear caught at an #inflection point. Tight #labourmarkets point to continued #economic progress and a chance at sticking the fabled soft-landing. Other data, in particular household consumption, speaks to the possibility of #recession.
This quarterly we also dig into #China's changing economic paradigm and touch on the scope for attractive vintage years in #privateequity.
As attention spans shorten, we feel there is value in writing and reading something of substance, if only once a quarter (and if of questionable substance)! Chance this #quarterly over your next #coffee break.
