Tramondo Quarterly (Q2 2023).

China’s reopening after COVID-19 lockdowns contributed to the rebound of Chinese equities and positively impacted global stocks with significant revenue exposure to China.

In Q1 2023, global pricing pressure eased. US consumer prices softened to 6.0%. In Europe, pricing pressures seem to have reached their apex at the beginning of the fourth quarter, as well; the inflation rate retreated from 10.6% to 8.5%.

Even though the banking sector tended to be a canary in the mine with regard to systemic issues, we see no reliable indicators pointing to a Financial Crisis 2.0. Nevertheless, this additional risk factor in the financial markets equation could lure investors to seek higher risk premia, thereby reducing the equity market return potential in the months ahead.