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Global Economic & Market Outlook

• Fears of a hard landing of the US economy have gradually dissipated from market valuations, making room for the scenario of a “happy” slowdown as the markets’ baseline forecast.
• We disagree with the view that markets gradually converged to the Fed’s more optimistic growth outlook. Instead, we view the upward move of expected Fed funds rates and Treasury yields since October as the result of increasing inflation worries, as breakeven inflation has rebounded strongly.
• We also disagree with the view that the US economy is in fact growing faster than current spending and production data suggest. Analysing past revisions of GDP data, we find that both the GDP level and growth rate have been systematically revised downwards since 2000.