Shifting Winds – and Fed Pause, Not Pivot
Jack Janasiewicz offers his tactical take on the macroeconomic environment in this podcast recorded on May 4, 2023.
- Starting points matter. We are coming into a period of slower growth, following a fairly robust level of nominal growth. We can easily afford to trade some growth for lower inflation prospects in order to avoid a hard landing.
- On the inflation front, March CPI came in lower than consensus estimates, and while the good news didn’t stop there, the Fed’s job isn’t done yet.
- The pause in rate hikes has finally arrived, but the Fed is maintaining its hawkish bias. We don’t expect a pivot.
- Corporate earnings season is well under way, and companies across almost all industries are reporting the same thing: Operating margins are holding up just fine, thanks to aggressive cost cutting and a two-year head start to prepare for changing economic conditions.
- Many of the headwinds of 2022 have shifted to tailwinds in 2023. Tight supply chains have continued to normalize, and an improved China demand outlook and fading energy pains in Europe have provided a better global growth backdrop for multinationals.
- The data right now is not indicative of a sharp slowdown and the stock market may very well have already discounted any earnings recession. Time will tell.
Investing involves risk, including the risk of loss. The views and opinions are as of May 4, 2023 and may change based on market and other conditions. This material is provided for informational purposes only and should not be construed as investment advice. There can be no assurance that developments will transpire as forecasted. Actual results may vary. Although Natixis Investment Managers believes the information provided in this material to be reliable, including that from third party sources, it does not guarantee the accuracy, adequacy or completeness of such information.
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