When can investors expect inflation to fall and central banks to ease the pressure on interest rates? This was the question that dominated stock markets in the US, UK and eurozone in 2023.
After the US Federal Reserve raised rates to tackle soaring inflation, investors agonised over whether the Fed had done enough to tame rising prices. Or had it, in fact, overdone its approach, risking a painful recession?
At the end of 2023, it appears markets have drawn their own conclusions, by and large shrugging off worries of a “hard landing” in which high rates pitch economies into a downturn. Inflation went into decline in many regions, while data points to a strengthening US economy and labour market. The S&P 500 is up around 23 per cent over the year — the tech-heavy Nasdaq up 41 per cent.