Market Insights
May 2023

Last month, all eyes were on US politics being able to reach an agreement on the debt ceiling. A deal was reached under the wire, which brought back investors’ positive sentiment. Recession fears have been pushed out towards 2024. Even the most bearish economists are now turning less negative on the US and European economies.

Tech replaced safe havens like Consumer Staples and Utilities, as they hold large cash positions and are responsible for most of the performance of the main indices like the S&P 500. Is “AI” a hype or a complete reshaping of the use of technology in many fields of our daily lives?

We are now entering summer, which is historically known for storms and stress in the markets, caused by less liquidity and little appetite from investors to enter new positions. The focus will remain on economic numbers and especially on how much positive or negative surprises are already priced in. The US consumer data have shown resilience, is it going to last? Are current valuations sustainable going into H2 of 2023? We are climbing the Wall of Worry …

China will also play a central role in the second act of 2023. Everyone is waiting for the great recovery that is playing hard to get, and that will be the main driver for commodity prices such as copper, steel and oil. The Middle Kingdom needs a stimulus package in order to return back to growth and achieve the growth target set by its government.

Credit Spreads still seem too low, as the refinancing of debt has become much more expensive, and usually the effects of higher financing costs are lagging. Watch out for High Yield with low quality.