MyStratWeekly – March 21st 2023

Topic of the week: Update of our forecasts

• As of every quarter, during our investment committee process, we update our economic forecasts. Here we present this update;
• Our central scenario is a sluggish recovery with economies bordering on recession;
• The structuring element of our view is inflation as we expect underlying pressures to persist at a high level that should make central banks uncomfortable.

Market review: A panic cycle

• The ECB raised rates but offers no guidance for future moves;
• Financial developments will inform policy decisions;
• Unheard-of volatility in rates;
• Fed injects $165 Bn.

Stéphane Déo's podcast

• What about China ?

Chart of the week

One of the caracteristics of last week’s market turmoil is the unprecedented volatility in the bond market. Wednesday, the daily range of the Bund was 40 bp. This is totally unusual, the previous all time high since 1999 had been recorded on the 8th of August 2011 at 29 bp.

It is interesting to note that the MOVE index, which measures the expected volatility on the Treasury has also jumped to 200, close to its all time high. Paradoxically, the VIX remained below 30 showing clear signs of stress, but to a level considerably lower than what we witnessed in the bond market. Similarly volatility in FX remained relatively subdued.