Global Asset Allocation: The View From Europe

T. Rowe Price
By November 24, 2022 14:17

Global Asset Allocation: The View From Europe

On the surface, the better‑than‑expected rebound in US gross domestic product (GDP) growth in the third quarter would reinforce the Fed’s need to remain aggressive on tightening policy. However, looking at the details, there is growing evidence that the economy is feeling the bite of sharply higher rates. Consumer spending, comprising nearly 70% of GDP, declined while residential fixed investment, a broad measure of housing activity, slumped by more than 26%. Consumer confidence data last month also flashed warning signs that consumers were increasingly concerned about the impact of high inflation and are worried about the job market ahead. Signs of slowing were seen in the October ISM Manufacturing Index that fell to levels last seen in May 2020, although it did show promising signs on the inflation front with supplier deliveries and prices paid easing. US markets have responded positively to the batch of bad news, with US Treasury yields easing and equity markets climbing higher. While the Fed remains vigilant in its battle to fight inflation, evidence is building that its front‑loaded rate hikes are having an impact, at least on growth and potentially preceding softer inflation data. Meanwhile, investors are likely to continue to cheer bad economic data in hopes that it brings good news of a Fed pivot in policy

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T. Rowe Price
By November 24, 2022 14:17

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