A Positive Sign for Investors


The Battle Against Inflation Continues

Monday, April 3, 2023 By Vincent David-Robin

Last week saw a strong performance for equity markets, with the US markets up 3% and European markets up almost 5%. This is welcome news for investors who have been grappling with market volatility over the past few months.

The added liquidity and reassuring words from the Federal Reserve and Treasury helped to calm fears about the recent failures of some banks. This has given investors a renewed sense of confidence in the markets.

Marginal Change Spreads Positive Sentiments

One factor that has contributed to the market's strength is lower inflation numbers in both the US and Europe. While the levels are still high, the lower marginal change was viewed as a positive sign by market participants. In Europe, this was largely due to less price pressure on energy supply. In the US, it was more widespread across categories.

However, food inflation in the US and Europe continues to rise, which may have an impact on consumers.

Inflation Expectations Still Need to be Managed

The Federal Reserve is in a tricky position when it comes to managing inflation. On one hand, they need to support the economy and ensure that the labor market remains strong. On the other hand, they need to manage inflation expectations and prevent prices from spiraling out of control.

The risk for the Federal Reserve is that a rallying US equity market, added liquidity, and lower Treasury yields may contribute to looser financial conditions. This could prevent inflation from coming as quickly as expected in a strong labor market.

General disclosure:This material is intended for information purposes only, and does not constitute investment advice, a recommendation or an offer or solicitation to purchase or sell any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from Aria Capital Management or any of its related companies to participate in any of the transactions mentioned herein. This material may contain estimates and forward-looking statements, which may include forecasts and do not represent a guarantee of future performance. This information is not intended to be complete or exhaustive and no representations or warranties, either express or implied, are made regarding the accuracy or completeness of the information contained herein. The opinions expressed are subject to change without notice. Reliance upon information in this material is at the sole discretion of the reader. Investing involves risks. Past performance does not guarantee future results. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.


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