U.S. Markets: 2023, a strong start, can it last?: the MUFG Global Markets Podcast

George Goncalves, MUFG Head of U.S. Macro Strategy, argues that the latest price action, as positive and powerful to the upside that it has been, has skewed perception of the macro outlook. Granted, it’s likely that some positive factors – mostly the weather in Europe and contained energy, plus China reopening – have improved the outlook, these alone won’t be enough to overcome the cumulative effective of global central bank tightening and ongoing draining of liquidity via various forms of QT.  In the end, it’s likely yet again another short-term bear market rally in risk assets.

Meanwhile, rates markets continue to defy the Fed and where policy rates will eventually stabilize at. These inconsistencies matter and could also drive Fed thinking. Chair Powell might remind investors that their policies work through tightening financial conditions. We expect a “hawkish” 25bps hike at the next meeting.

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