- The S&P 500 index is officially in correction territory, interest rates have risen further than the market had hoped. But there are good reasons to remain confident that equities are not heading into bear market territory.
- The US Federal Reserve’s preferred measure of wage inflation is expected to show a further significant decline. The wage price spiral is operating nicely in reverse with lower inflation leading to lower wage rises.
- Overall, the US economy is set to slow, courtesy of a slowdown in services, but corporate earnings should recover as the manufacturing sector picks up. In the current context this is the perfect combination: lower inflation pressure but better corporate earnings.
- And it’s not just the US, early indications are that core inflation is falling in Europe too.