Good morning,

Investment markets have rebounded so far in 2023, after a poor 2022. As we entered 2023, a fed induced recession was the big market worry. Whilst it remains to be seen whether the ‘goldilocks scenario’ of a soft landing in the US materialises, the market is now pricing in several rate cuts in the US later this year and through into 2024. The ECB are also close to peak rate level but are unlikely to cut as quickly as the Fed (who moved both quicker and stronger).

As inflation trends lower in the US (albeit still ‘sticky’) the market will continue to look to inflation prints and jobs data for insights into how the Fed will move during the summer. With that in mind, the weekly jobless claims and the non-farm payrolls data on Friday 2^nd June will garner the attention of market participants. Finally, whilst the US debt ceiling impasse is not without risks, history tells us that a deal tends to get done. Sentiment towards risk assets overall continues to be cautious, which serves as a positive contrarian indicator. Across multi-asset funds, Zurich remains positively positioned towards equities.

We would like to invite you to join us for the Zurich Investment Conference 2023 on Tuesday, 13 June in the Shelbourne Hotel, Dublin at 10.30AM. We will also ‘live-stream’ this conference so if you can’t make it in-person, you can still attend. You can register here.

As always, if you wish to discuss anything in this newsletter in further detail, please do get in touch.

Weekly Investment News

US stocks finished the week up 2.1% in euro terms last week as investors priced in the possibility of a deal being struck in Washington that would end the current debt ceiling impasse. On Thursday, news of a potential vote being carried out saw US stocks rise to their highest levels since August of last year. Unfortunately, the week ended with Republican officials walking out of negotiations in Washington, leaving further uncertainty for investors as to the US’s short-term ability to repay its debts. Earlier in the week economic data suggested a robust economy with industrial production data surprising to the upside, increasing 0.5% well above expectations of a flat result. US retail sales came in slightly below expectations however, rising by 0.4% despite expectations of a 0.7% figure. Core retail sales which exclude autos, gasoline, building materials and food rose 0.7% for the month of April in line with expectations.

In Europe, Germany’s Dax Index which comprises of Germany’s 40 largest companies, hit a record high on Friday after positive earnings reports improved sentiment. Large German car manufacturers and industrial stocks have benefited from a more positive outlook for Europe. A milder than expected winter and increased trading with China has meant European economies may indeed avoid recession which had been a fixture of European investor sentiment for the previous number of months. In the UK, the May consumer confidence figure rose to its highest level in over a year, rising by 3 points to a figure of -27. This came as the Bank of England changed its outlook for the UK economy, stating it no longer expects a recession.

Stocks in Asia Pacific did not have as positive a week, with Hong Kong equities down considerably on the back of poor US-China relations. In contrast however Japanese equities rallied because of improved sentiment and increased investor inflows. Many investors have re-evaluated their position on Japan in 2023, which has gained 16.2% year to date.

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