Either profits are about to fall or, if they don’t, central banks will have to keep raising rates until they do
Markets run on narratives. With mid-summer has come a different story: The Fed won’t have to be so aggressive because it will soon squeeze the life out of the economy.
The prospect of lower growth and falling rates would mean that it makes sense to buy bonds.
The loss of enthusiasm for equities reflects a belief that bond yields have risen about as far as they need to.
The narrative has unmistakably changed, and growth fears may now even be more important than worries about inflation.
Andrew Lapthorne, chief quantitative strategist at Societe Generale
Either profits are about to fall or, if they don’t, central banks will have to keep raising rates until they do.
John Authers Bloomberg 5 juli 2022
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