Fynsa
Prudence indicates that we should wait for the end of the rate hike cycle to return to investing, but beware that time deposits no longer pay what they did a few months ago and inflation is also falling.
At the last FOMC (Federal Open Market Committee) meeting, they changed the forward guidance of their statement, hinting that there is a good chance that this will be the last rate hike of this cycle.
The level of uncertainty induced by the banking crisis keeps us in a more defensive posture in terms of allocation.
The actions taken by the Fed and the FDIC (Federal Deposit Insurance Corporation) have helped contain problems related to U.S. banks, so there should be no lasting impact on financial stability.
The divergence between equities and interest rate levels cannot go much further and should be reversed.
Although the Fed is nearing the end of its rate hike cycle, they are still likely to raise the fed funds rate further, given the strength of the labor market, but keeping the pace moderate.
Higher interest rates put pressure on valuations during 2022, but the focus will now shift from valuations to corporate earnings in an increasingly challenging macro environment.
Most baseline scenarios for 2023 assume either a soft landing or a mild recession, under the assumption that inflation will decelerate significantly and that the terminal policy rate would be in the range of 5.0% - 5.25%.
