– 2023 has seen two major narratives: the anticipated global recession and the AI-driven equity rally.
– Equity markets have rallied, fuelled by optimism surrounding AI and specific sectors, while defensive sectors have lagged.
– Discrepancies between market behaviour and leading economic indicators raise concerns and call for a cautious approach.
– The economic outlook points to a slower economy and a potential recession, potentially leading to volatility in equity markets.
– Multiple leading indicators suggest a high probability of a US recession, but this is not yet reflected in market prices.
– Equity markets appear expensive based on various valuation metrics, while bond market volatility warrants caution.
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