As the second half of 2023 unfolds, investors face a dynamic landscape with diverse opportunities and challenges. Uncertainty looms over the global economic growth trajectory, with potential divergences in different regions. While the tightening of the real economy has led to a gradual deceleration in growth, the outlook varies: a mild US recession, sluggish growth in Europe, and encouraging resilience in emerging markets paint a complex picture.
A Slowdown in Inflation Trends
Inflation, while on a gradual decline, continues to display stubbornness in core figures. Reflecting on previous episodes of elevated US inflation, experts predict a two-year period for core inflation to halve from its peak. This trajectory remains consistent in the present scenario.
Monetary Tightening Reaching a Plateau
The actions of the Federal Reserve and the European Central Bank in tightening monetary policies appear to be reaching their cyclical peaks. For the remainder of 2023, rate cuts are unlikely, driven by inflation hovering above central bank targets and the postponement of an economic slowdown towards the end of the year.
Emerging Market Growth Premium
Emerging markets maintain their growth premium over developed counterparts, indicating greater resilience. Asia, in particular, has emerged as an attractive destination for investment flows, with China and India transitioning towards sustainable and inclusive long-term growth models.
US Consumer Resilience Under Scrutiny
The key variable of US consumer resilience warrants close observation. So far, robust consumer demand allowed companies to pass on higher costs successfully. However, this favorable scenario is projected to wane, with dwindling savings and tighter lending conditions impacting the outlook for consumers. This is anticipated to contribute to a decline in US sales and earnings per share.
