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Risk-on mode and the expectation of an end to US rate hikes by early 2023 may be premature

Diversification can help protect portfolios even when today’s backdrop remains complex with more rate hikes, widening mortgage boycotts in China and energy issues in Europe

IS THE US economy in a recession? Last week, the US economy unofficially or technically dipped into a recession as defined by the National Bureau of Economic Research (NBER), with a second, successive quarter of negative GDP (gross domestic product) growth. The US equity markets seem to think so too and have started to price in possible rate cuts by the Federal Reserve in the first quarter of 2023, sending equity markets into a risk-on mode.

However, based on other indicators that the NBER uses to gauge the relative health of the US economy, the US is clearly not in a recession. For instance, gross domestic income rose in Q1 and non-farm payroll continues to grow at a rapid pace. And while labour...

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