Bassanese Bites: Hawkish pause – September 25 2023
Global markets
The ‘no-landing’ correction in global equities continued last week, with the S&P 500 down a chunky 2.9% and US 10-year bond yields rising another lazy 0.10% to 4.44%. The key catalyst, of course, was the Fed meeting. While the Fed kept rates on hold as widely expected, the ‘dot plot’ of Fed policy expectations retained a further rate hike this year – and one less rate cut in 2024. The ‘higher for longer’ policy outlook pushed up longer-term bond yields.
The S&P is now down 5.7% from its last end-week high on 28 July and last week broke below its recent end-week low on 18 August – confirming the downward correction remains in place. The correction in recent months has coincided with a move higher in US 10-year bond yields to above 4% and above the highs of late last year – indeed, yields have reached levels not seen since 2007. In turn this has reflected resilience in US economic growth and reduced expectations for Fed rate cuts in H1’24. The $US has also strengthened in this period.
