Economy

The trajectory of China’s infrastructure investment in 2023H2 will be like what occurred in 2021H2. Growth will likely drop from the current nominal 10% to 0-2% in the next six months. China will continue promoting environmentally friendly infrastructure projects that may prevent a contraction in infrastructure investment in 2023H2.

History suggests that a “soft landing” is highly unlikely after such an aggressive Fed tightening cycle. The rally could continue for a little longer but, on the 12-month horizon, market risks are very skewed to the downside.

The latest round of earnings calls from the systemically important banks suggested that the expansion is still intact. Households are still flush and still spending and consumer and business delinquencies remain remarkably low.

The ECB’s tone has changed decisively. Intransigent forward guidance is gone; data dependency is in. What does this transition mean for the path of European interest rates and the euro?

Investors remain cautious about the US economy and still have significant cash that needs to be put to work which could extend the rally further. Earnings rebound later in the year will be supported by rising sales growth and surging earnings of the Magnificent Seven. A restocking cycle, and a pickup in freight activity support transports. Upgrade Transports to an overweight.