A look back at recent macro and market trends

A look back at recent macro and market trends


Derek Hamilton

  • Managing Director, Economist – Ivy Equity Boutique
  • Read bio

Every quarter, we release Inside the markets, a chart-powered guide that provides a detailed look into macroeconomic developments, equity market insights, and fixed income trends.

As a part of the guide, we also summarize our observations and takeaways from the previous quarter as it relates to the key topics on investors’ minds:

  1. The US economy remains firm. Consumer spending is growing at a healthy pace and employment is improving. Despite weaker indications from surveys, business investment is holding up better than expected. Government spending continues to be a tailwind for the economy. As a result, real GDP growth has been strong in the most recent recovery and may continue to follow this trend.
  2. Inflation continues to move lower, albeit at a slower pace, and the US Federal Reserve (Fed) is signaling interest rate cuts later this year. However, that will depend on the progression of inflation. Any disappointment on inflation will likely push out the timing of rate cuts. At the same time, the Fed plans to slow the pace of balance sheet reduction later this year, which would allow it to respond to tight liquidity in the banking system should bank reserves fall to untenable levels.
  3. European growth is recovering after euro-area economies slowed less than expected. Inflation has moved lower, especially in the euro area. This has caused the European Central Bank (ECB) and the Bank of England (BoE) to stop raising interest rates and should allow rate cuts later this year.
  4. The Chinese economy continues to grow at a disappointing pace, and the housing market is still contracting. Easier policy has not been forceful enough to significantly boost the economy yet.
  5. US equity markets have remained strong, particularly large-cap stocks. Market breadth continues to be narrow, as relatively few stocks drive the performance. Market multiples seem elevated when compared to historical trends, other global equity markets, and the current level of interest rates.
  6. Fixed income markets were more mixed, as higher interest rates and inflation concerns weighed on certain segments. US high yield and investment grade spreads remain very tight.

Looking ahead, although we are less convinced of an impending recession, we are concerned about the continued strength in the US economy. As we recently pointed out, a no-landing scenario where US GDP continues to grow above its potential could renew inflation pressures, causing the Fed to raise rates further.

Real GDP (year-over-year % change)

Real GDP (year-over-year % change) Chart

Note: Shaded areas on the chart represent a recession.

Sources: Macrobond, US Bureau of Economic Analysis (BEA), US Congressional Budget Office (CBO), International Monetary Fund (IMF).

Chart is for illustrative purposes only.

Inside the markets

Chart-powered guide with macroeconomic perspectives and insights on the markets

Access here


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