- 2nd quarter US GDP grew at a 2.4% annualized rate, reflecting continued consumer spending strength and an increase in business investment
- The Fed raised its policy rate 25 bps to 5.25% – 5.50%, as expected, with forward guidance stressing a data dependent approach for future hikes
- Headline CPI fell to a 3.0% annual increase, lower than expected and the slowest rate since March 2021
- Equity markets rallied as lower inflation boosted sentiment
- Bonds lagged as surprising economic growth sent rates higher
Asset Class Valuations
- Equities currently priced for a benign economic outcome
- Favor core bonds (US Treasuries) over high yield
- Cash remains attractive with yields around 5%
Key Risk Factors We Are Watching
- Inflation and labor market data
- Tightening financial conditions
- Fed policy mistake
- Downward revisions to corporate earnings
- Ongoing geopolitical tensions
- Weaker than expected China recovery
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