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Asset Allocation Observatory: The benign macro environment continues

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Last week was particularly rich in terms of data and events: PMI in Europe and in the US, the Chinese Parliament Meeting, lots of jobs data from the US, Powell Testimony at Congress, the ECB Rate Decision and Monetary Policy Conference. Overall, none of the data/declarations were far from the expectations, and, given the benign macro environment, this was enough to reassure markets about the fundamental healthy status of the economy.

The S&P closed the week at about 1% higher, as Powell reiterated the Fed is on track to cut rates this year despite the latest not-so-weak inflation data and the strong job data. The performance was also helped by the new funding raised by New York Community Bank, the latest US regional bank at risk, which is now effectively safe, eliminating the chance of a regional banking crisis. 

European equity did even better, at +1.6% for now: the ECB economic forecast revisions, even if negative on the growth side, showed much lower expectations for inflation, with the 2024 number for the nominal YoY expected at only 2.3%. Overall, it seems even more certain that cuts will start in June, and this could be enough to support the market rally.

Chinese equities had another lacklustre week, despite much higher-than-expected export data. The Parliament Meeting was, to put it simply, disappointing. Markets were desperately looking for clues about new – and stronger – support measures for the economy and for markets, but nothing material was said, while at the same time, the government set an ambitious growth target of 5% for the year. 

Giorgio Broggi: Giorgio joined Moneyfarm as a Quantitative Analyst in December 2021 and he is a member of the Investment Committee. Prior to joining the company, he worked at Barclays Wealth Management and S&P Market Intelligence, gaining expertise in Funds Research and ESG Investing. Before starting his professional life, he successfully completed a double-degree at Eada and EDHEC Business School, obtaining two Masters in Finance and specialising in factor investing and portfolio construction. He is a CFA charterholder.

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