Market development – Q2 2023


Central banks quickly put a lid on the banking turmoil in March, which produced decent increases at the end of Q1. This trend continued into Q2 when especially equities benefited from the positive sentiment. This was the case although we have seen significant interest-rate increases as central banks continue hiking their rates.

If we look at economic growth in countries around the world, the situation remains that the manufacturing industry (production of goods) is dominated by setback and falling demand whereas the service sector (retail trade, hotels, restaurants, etc.) continues to benefit from increasing demand and low unemployment. Yet, the last couple of months have also shown slightly weaker trends in the service leg of the economy.
Inflation figures keep dropping back, but this is primarily due to sizeable declines in energy prices whereas core inflation (excluding food and energy prices) remains well above the central banks' targets.

Due to historical interest-rate hikes in the past 12 months and a high inflation we still see a risk of dark clouds on the horizon.
Right now, the sun is shining, and sentiment in the markets is positive. This happens on expectations that the central banks have managed to dose the interest rate increases just right for the economies to land softly and that we avoid a major economic downturn.

Figure 1: Development of equities and bonds in 2023