September lives up to its reputation for being a challenging month for markets.
U.S is showing signs of slowdown
Although the probability of the U.S. falling into recession in 2023 continues to fall, there are nevertheless some signs of slowdown and moderation in the U.S. economy including: tightening financial conditions, rising consumer loan delinquencies and a tight labour market.
Recession risk in Canada Rising
While the U.S. has greater prospects of making a soft landing, recession risk in Canada is rising. The economy has entered a period of weaker growth, with a marked weakening in consumption and a contraction in manufacturing activity. The disruption caused by wildfires in June likely also played a role in most recent contraction in Q2 GDP.
Rates to remain higher for longer
Central banks across major developed markets have been maintaining their hawkish bias in a “higher for longer” forward guidance and are not ready to signal easier policy with inflation still above their targets. Japan remains the lone outlier, with growing pressure for the Bank of Japan to tighten policy due to rising inflation and resilient domestic growth.