Good morning,


Markets continued on their recent upward trajectory last week, further paring losses for the year so far. For example, the NASDAQ is now up 22% from its 2022 low. Last week, US inflation data (more details below) was well received by investors who are now wagering that the Fed won’t tighten as aggressively. This may well materialise, but there are some cautionary points to note. Inflation may have now peaked, but remains elevated versus history, and significantly higher than the prevailing headline policy interest rates on both sides of the Atlantic.


In the US, the Fed stated that it would need to see ‘clear and convincing’ evidence that inflation is easing before it would amend the current path of higher rates. History tells us that rates usually have to intersect with the inflation rate to put a cap on prices. Further insights into the mindset at the Federal Reserve will be available from the latest Fed minutes which are released on Wednesday.


In the immediate short term, such large upward moves are unlikely to be sustainable (unfortunately markets cannot gain 10% each and every month). Whether the moves since late June are a ‘bear market rally’ or something more constructive remains to be seen.  At Zurich, we are keeping an open mind and a flexible approach to asset allocation.


If you have any questions, please do get in touch.