It seems everyone is talking about recession. Are we already in one? Should we pencil one in for 2023? Is there any possibility one can be avoided entirely? Stock market investors in North America, Europe and Japan no longer seem terribly worried.
In July, eight key indices (as set out in Table 2) cast aside their cloaks of gloom and went looking for the sun again. NASDAQ performed best (+12.3% month to month), followed by the Russell 2000 (+10.4% m/m), S&P 500 (+9.1%), STOXX Europe (+7.9%), the DJI (+6.7%), the German DAX (+5.5%), Tokyo’s Nikkei (+5.3%) and London’s FTSE (+2.5%).
More than half of Q2 earnings have now been reported and results versus estimates have been better than expected. It must be acknowledged, though, that this is partly the result of downward revisions to target estimates due to a slowing economy. U.S. ‘real’ (i.e., after inflation) GDP change in Q1 of this year was -1.6% annualized and in Q2, -0.9%.
There are two kinds of confidence that have a great deal of bearing on where economies will meander next. The first of these is consumer confidence.
