Economy in the Spotlight as 2023 Dawns: Stocks Rally and Bonds Slump on Growth Optimism
-
As calendar turned to January, market participants took cues from improving economic growth data rather than just inflation and policy expectations.
-
Equities rallied while bonds struggled, reversing the strong positive correlation between them seen over the past 2 years.
-
Normalizing inflation allows investors to refocus on growth prospects, which currently look resilient.
-
Bonds may reemerge as portfolio diversifiers now that stock-bond correlation has broken down.
-
Persistent growth could be tricky for long-dated bonds; equities more likely to stumble too if growth falters.