- Stock market gains: The market is expected to continue gaining ground, with the S&P 500 reaching new closing records in 2023. Despite flat performance in European and Asian markets, the overall trend is positive. The resilient labor market and the absence of a recession in the U.S., along with supportive economic factors, contribute to the upward trajectory.
- Chinese policy measures: As China faces softer economic growth and the risk of deflation, policymakers are likely to consider implementing measures to stimulate the economy. There is a possibility of a cut to the central bank lending rate to counter the disappointing economic data and boost growth. These policy actions aim to mitigate the impact of shifting consumer spending patterns and increase demand for Chinese manufacturing.
- Tech sector performance: The tech sector may experience a slowdown or give back some of its previous gains driven by artificial intelligence (AI). Conversely, small-cap and cyclical stocks are expected to perform relatively well. This shift in investor sentiment suggests an appetite for riskier and more cyclical assets, as the U.S. continues to outperform expectations in terms of economic growth and with a tight labor market.
- Global concerns about inflation and rate hikes: The recent rate hikes by central banks in Australia and Canada have raised concerns among global investors about inflationary pressures. The possibility of further rate hikes depends on whether inflation levels decrease and come closer to the target of 2%. Bond yields have risen as a result of these concerns, indicating nervousness in the investment community.
