November 2022| Central banks are working out how far they should go in terms of their aggressive tightening talk. The strong job market does not support a shift in stance from the Fed; while signs of moderation are emerging in wage growth, it remains above pre-crisis trends, and inflation is persistent and challenging. While the peak in US inflation is likely behind us, recent data confirm that core inflation remains sticky. Financial conditions are tight, but could become even tighter as the Fed’s risk of overshooting remains high. Globally, questions over long-term debt sustainability come at a time when markets are clearly addicted to central bank liquidity. As we saw in the UK, the miscalibration of fiscal and monetary policies can force a central bank to step in.
01 | Amundi Institute Insights: Central banks are trying to work out how far they should go in terms of their aggressive tightening talk.
02 | Fixed Income: Investors should be watchful of the liquidity on balance sheets as companies spend their cash, and take note of whether policy tightening will lead to a financial instability.
03 | Equity: From a style perspective, we prefer quality value stocks. At sector level, we like energy, materials and banks.
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