Throughout 2023, financial markets have been focused heavily on how the various economies will land in terms of the widely expected recessions. Will they land “softly” or “hard”, meaning either a shallower or deeper recession? However, the year-to-date would suggest there could actually be no landing at all, with growth remaining in positive territory, thus negating recessionary conditions at this time.

August’s volatility can largely be attributed to growth in the United States proving to be too strong for comfort. Ordinarily, this may be welcomed as good news but, in our current market conditions, resilient growth alongside the attendant risk of sticky inflation leads to the prospect of interest rates remaining “higher for longer”.

Globally, different economies are moving at varying speeds and each has differing underlying issues to consider. However, most notable is the demand for goods and services which has drastically changed from what we saw during the pandemic. Now, consumers are much more focused on things such as holidays abroad and live entertainment that were not available during this time which allowed them to save up for these experiences. Therefore, the knock-on effect is slowing the fight against inflation which is also further clouded by the lingering effects of supply chain disruptions and labour market shortages.

The difference in global markets can be seen with the contrast of the US and China at the moment, two of the world’s largest economies. China is struggling to bounce back due to factors such as the property crisis and consumer confidence following the country’s strict zero-Covid policy. Meanwhile, the US economy is much stronger, looking to be a long way from the recession that many predicted at the start of 2023.

August also saw the annual gathering of US central bankers at Jackson Hole, Wyoming. Jerome Powell, the Chair of the US Federal Reserve, provided sustenance for both bulls and bears. The conclusion was that central bankers feel the bulk of their policy tightening is behind them and are now returning to a mode of “data dependency”.

It is thought that the sharp and consistent rises in interest rates over the last year or so may eventually lead to a broader economic slowdown, but this is taking longer to be borne out than many expected. Despite this, we are hopeful in experts’ predictions of a more optimistic view for the remainder of 2023 and into 2024.

If you wish to discuss your investment opportunities at this time or have any questions regarding this update, please do not hesitate to get in touch with a MacDonald Partnership Independent Financial Adviser on 0117 450 1300.