2023 had started brighter for all markets after the difficulties of 2022. Markets in the UK and Europe enjoyed a positive month in January thanks largely to improved company earnings. February was a month of mixed fortunes for global equity markets. Emerging markets underperformed reversing January’s trend, with China falling over growing US tensions.
As I said last quarter the US terminal rate will continue to drive markets and indeed this is the position, we are in. US inflation looks to be more persistent than expected, and the surprising strength of the jobs market and economy overall is pushing up the terminal rate expectations. Higher for longer expectations of US interest rates has had knock on effect in Asia and in the bond markets which both have had a tough time over the last few weeks.
Overall, we expect uncertainty will continue until we start to see meaningful falls in inflation and wage growth.