Please find the next blog in our monthly series that provides a snapshot of the markets and the state of the economy.
- Market volatility surged after the sudden collapse of Silicon Valley Bank and Signature Bank led to fears of systemic risk to the banking sector
- Despite the volatility the US Fed hiked 25 bps to a range of 4.75% to 5.00%, with guidance that suggested one additional hike this year
- US CPI fell from 6.4% to a 6.0%, in-line with expectations, while the US labor market remained robust with an increase to payrolls of 311,000
- Stocks and bonds rose as markets remained resilient
- Greater exposure to banking issues caused small caps to lag
Asset Class Valuations
- Equities currently priced for a mild recession
- 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 mistake
- Potential bank-crisis contagion
- Downward revisions to corporate earnings
- Ongoing geopolitical tensions
- Potential debt ceiling crisis
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