Labor Market

Financial commentators, politicians and policymakers have increasingly been blaming stubbornly high inflation on companies pursuing aggressive pricing strategies to boost earnings and margins. In this Special Report, we investigate the concept of “greedflation” – companies persistently raising prices faster than costs are increasing to pad profit margins - and see if the associated conclusions about corporate pricing power and inflation are borne out by the data in the US, euro area and UK.

The ECB continues to focus on lagging indicators and risks once again to cause a policy error that unduly hurts European growth. What does it mean for investors?

If the recession begins this year, it is unlikely to be mild, because inflation will not have fallen by enough to allow the Fed to cut rates aggressively. In contrast, if the recession starts in 2024 or later, when inflation is likely to be much lower, the Fed will be able to cushion the blow. Our base case remains a 2024 recession but the risks around that view have increased in light of recent banking stresses.

Indian EPS growth is set for major disappointments vis-à-vis the lofty expectations. Weak domestic demand amid tight fiscal and monetary policy entails more downside in stock prices. Stay underweight.

The Fed hiked 25 basis points at yesterday’s FOMC meeting while also signaling that the tightening cycle is now on hold. We discuss the short-run and long-run implications for Treasury yields.

Pent-up demand for services is keeping the global economy going, but we still expect recession over the next 12 months. Investors should keep a cautious portfolio stance.

The latest round of earnings calls from the systemically important banks was encouraging on balance. Households are still flush and still spending and consumer and business delinquencies remain remarkably low. Though a recession is surely coming, it doesn’t seem to be lurking just around the corner.

A benign disinflation is probable during the remainder of 2023. Unfortunately, just when most people become convinced that a recession has been avoided, a recession will begin.

Through February and March, the number of US ‘job losers’ surged by almost half a million. Constituting the largest two-month increase in Americans who have lost their job since the depth of the pandemic. Unless we see a big drop in the number of job losers in the coming months, the correct investment strategy is still to position for a US recession that starts in 2023.