27 February 2023

Markets discount prolongation of the Fed’s restrictive policy

Stock markets paused in the face of macro news coming out of the US towards the end of the week. The PCE index, in fact, accelerated in January and at the same time consumption continued to grow. At this point, a prolongation of the Fed’s restrictive policy seems a foregone conclusion, and the consequences for economic growth in the coming months become more uncertain. During the week, in fact, announcements of job cuts by major US industries continued. The situation does not look any better in Europe, where the German economy slowed in Q4 2022 and the possibility of entering a technical recession is becoming more concrete. Let’s look at some data from our weekly analysis.

In the past week, 11% of the instruments and indices used for our analyses showed a positive change. 88% experienced a negative variation. Analysing by macroclass, 8% of equity instruments and indices recorded a positive weekly variation. 16% of bond instruments and 17% of the other asset classes used for our analysis.

Improving valuations in the past week accounted for 23% of the total. The previous week, valuations that had been adjusted upwards were 17% of the total.

Among the equity analyses, improving valuations accounted for 19% of the total.

Among the analyses for bonds, 56.25% of the total were upgraded valuations.

Analyses of other asset classes showed an improvement in valuations of 29% of the total. Analyses relating to sentiment, commodities and currencies were included in this section.

Of the valuations, 21 per cent were above average in the short term. 24% were above the long-term average of valuations. Last week it was 19% and 31% respectively.