Market Outlook

As the market digests the September Fed meeting, history shows that the best entry points for bonds are often before the Fed starts cutting rates.

Hard landing, soft landing or somewhere in between? The good news is that many different paths could lead to a positive outcome for bond investors.

Capital markets have responded positively to better-than-expected economic outcomes so far this year. While the United States has managed to avoid an official recession, growth is almost certain to slow and increases in profits will be challenged. Given this backdrop, we see equities trading sideways to slightly higher in the near term and we continue to favor the U.S. over the rest of the world.

As we approach the halfway point of the year, all eyes remain on Federal Reserve policy and the severity of an economic slowdown.

An unexpected shock in the banking sector has stress-tested the economy and policymakers. Both initially passed. But the impact on lending and credit conditions remains unclear and increases the likelihood of a mistake by the Fed going forward.

Moving away from an abnormal regime of crisis-era stimulus won’t be a smooth process. But the volatility should be easier to stomach knowing that the destination is likely to be a healthier, more balanced economy.

Weak global growth for the year ahead appears almost certain. The outlook for capital markets is anything but.

For all the gloomy talk about the economy in 2023, stabilizing interest rates could be a bright spot for investors. But with imbalances lurking in the shadows, 2023 could be the year for higher-quality bonds, select large- and small-cap stocks, and private-market investments.

US markets have not taken kindly to the Fed’s renewed course of monetary tightening, but the effects of the Fed’s actions are stretching far beyond US shores.

The outlook for stocks and bonds given the expected paths of economic growth and interest rates.