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MarketScape · 11.13.23

How an Economic Slowdown Could Surprise the Market

We think investors have sometimes interpreted bad news for the economy as good news for stocks, hoping that a slowing economy would temper inflation and the Federal Reserve's rate hiking campaign. That interpretation may change soon.
  • Portfolio Construction
  • Multi-Asset Insights
  • Equity Insights
  • Market & Investment Trends
Key Points
What this is
Our analysis shows U.S. stocks appear overpriced as consumer spending may decline and interest rates may stay elevated.
Why it matters
If consumer spending declines, the economy and corporate earnings may decline as well, potentially hurting stock prices.
Where it's going
We are underweight stocks globally, favoring high yield bonds, natural resources and cash.
Main Point

Positioning for Less Risk-Taking

The market does not appear to be priced for a material slowdown in U.S. economic growth, and we see consumer spending slowing due to depleted savings and already higher credit card debt. With equity prices above fair value in our opinion, we think bad news about the economy will no longer be considered good news about Fed rate moves, leading to our global underweight to stocks.

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