In an August 2022 update to our annual global macroeconomic outlook, The Beneficient Company Group, L.P. and Oxford Economics finds the U.S. economy could remain resilient in the face of currently forecasted federal interest rate hikes.
Summary
The fast acceleration of inflation through H1 2022 and the broadening of inflationary pressures have led most central banks to reverse course on their ultra-accommodative policy stance. Broader concerns about stagflation therefore don’t seem likely. However, in this cycle, much will also hinge on how markets react to quantitative tightening. While our analysis suggests that much of the Fed’s remaining rate hikes have already been priced-in by markets, the same conclusion does not hold for its quantitative tightening program.
Whether a long-lasting recession can be avoided will depend on how persistent U.S. inflation turns out to be in face of planned tightening for 2022, but we still believe the U.S. economy to be sufficiently resilient to withstand currently projected rate hikes. In this mid-year follow-up, we analyze current economic trends and provide an update on the market views shared earlier this year in our whitepaper, Geographic Diversification in Private Equity Markets. Click the “Download the Update” button to the right to learn more about:
Macroeconomic Outlook
The global economy has been hit by multiple shocks since the beginning of the year, including the Russian invasion of Ukraine and more supply chain dislocation from Chinese lockdowns, which have led us to upgrade our view on inflation and downgrade our growth forecasts.
Public Markets
After the sharp market correction in H1 2022, equities have the potential to bounce back assuming valuations have room to improve and the discount rate shock proves fleeting.
Private Markets
While we still believe relatively good risk/reward tradeoffs to be broadly available in U.S. private markets, we recently updated our North American allocation tilt from “‘bullish”‘ to “‘neutral”‘ due to a number of factors, such as the potential impact of higher rates on leveraged buyouts.
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