Highlights:

• Despite gains in economic confidence and inflation stickiness in Q1 2023, bouts of banking stress have led the market to reprice the Fed path lower: a friendly combination for markets.
• Such a win-win situation will prove short lived. Following recent banking events, it is likely that lending standards will continue to tighten. This is not good news for growth.
• Known unknowns include the US debt ceiling negotiation, the so-far dormant EU bank-sovereign nexus, and US-China tensions.
• That said, 2023 is not 2008: rated-induced (unrealised) losses are less toxic than bad loans, policymakers have learnt the GFC lesson. Still, given the weak and risky growth prospects we prefer Cash, IG Credit and Core Govies to Equities, High Yield and Pheripheral Bonds.

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