As we enter the fourth and final quarter of 2023, US stock markets are up by 12% YTD, while European indices have appreciated by 10%, both in local currency terms. Equities have mostly benefitted from a more favourable economic backdrop than had been expected this year, and encouragingly we have also seen headline inflation continue to decline across developed regions. These factors have increased the probability of a ‘soft landing’ for the global economy – i.e. an economic slowdown without a recession. Bond markets, on the other hand, have been mixed over the quarter. A combination of persistent core inflation, aggressive central bank interest rate hikes, and a still robust US economy has caused bond yields to aggressively reprice higher to levels that have not prevailed in over ten years for some regions.
As the quarter ended markets began to feel that perhaps the phase of interest rate hiking might
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