Economic Outlook: Resilience in growth…and inflation
We came into the year with markets expecting (1) an acceleration in global growth and corporate earnings, (2) declining inflation, and (3) massive central bank rate cuts. Adding in some artificial intelligence-related excitement, it was hoped that a new and enhanced version of ‘Goldilocks’ was back. In anticipation, bond and stock prices rallied strongly through the turn of the year.
The combination of all three of these expectations seemed to be too good to be true, and so it has proved. Growth has been resilient…but so too has inflation. This dynamic supported risk assets but challenged government bond markets as the prospect of large and imminent rate cuts has diminished.
Exhibit 1: Resilient growth and inflation has pleased equity markets more than fixed income
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Market Insights Team
Karen Ward
Tilmann Galler
Maria Paola Toschi
Hugh Gimber
Vincent Juvyns
Aaron Hussein
Maximilian McKechnie
Natasha May
Zara Nokes
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