Global Markets

US stocks experienced another volatile session overnight but overall we felt they looked good until Janet Yellen’s comments which make zero sense unless she’s seeing more trouble on the horizon for the embattled banking sector which in itself is a contradiction of Jerome Powell. The tech-heavy NASDAQ posted a fresh 7-month high early in the session even as the Fed continued to hike rates suggesting the “bad news”  was fully built into stocks but they couldn’t handle the negativity delivered by Yellen. Our view hasn’t waivered through 2023 as we look for this growth index to rally towards the 13,500 area, or another 6% higher.

• We continue to look for US stocks to push higher over the coming months albeit in a “3 steps forward 2 steps back” manner – similar to last night’s volatile gyrations.

This morning’s hike by the Fed and the accompanying statement sent bond yields lower with the yield curve (spread between 2 & 10’s) still pointing to a recession but interestingly not as conclusively as it was before the recent banking crisis. Today’s move by the Fed suggests the Fed is confident they can navigate the dual challenge of rising inflation and the fresh banking crisis, the Biden administration’s decision to cover uninsured deposits at the failed 2 US banks would have helped Jerome Powell come to this conclusion although Yellen may have dented his confidence later this morning.

• We still believe the US will experience a technical recession through 2023/4 but key indicators aren’t looking too scary at the moment.