Monetary Policy & Inflation | US
Don’t Get Caught by the Bounce
- By Bilal Hafeez
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- 1 min read
We have seen a sharp bounce in stocks since the start of the month. US stocks are up almost 6%, with weak economic data easing some investors’ concerns about the pace and extent of further Fed hiking.
We are cautious in extrapolating this strength as markets are likely affected by large month- and quarter-end flows. Indeed, our analysis finds that over the past year, on around 70% of occasions, the first week of the new month sees stocks move in the opposite direction to the last week of the month (Chart 1).
We continue to have a bearish bias on risk, and we remain underweight stocks in our latest Asset Allocation report. The reasons are simple: inflation is stubbornly persistent and clearly embedded in wages, the Fed is failing to cool the economy, and recession risks are elevated.
Bilal Hafeez is the CEO and Editor of Macro Hive. He spent over twenty years doing research at big banks – JPMorgan, Deutsche Bank, and Nomura, where he had various “Global Head” roles and did FX, rates and cross-markets research.