Introduction

Share markets have pushed up to record highs this year, but can it continue? For some time now we have been monitoring seven key charts that are critical for the investment outlook. This note provides an update.

Chart 1 – global business conditions PMIs

A big driver of how shares perform this year will be whether major economies including Australia slide into recession and, if so, how deep that is. While it’s not our base case we would concede that the risk of a mild recession is still high given the big monetary tightening since 2022 and it’s noteworthy that the UK and Japan have already fallen into a technical recession with Europe stagnating. But even if the US and Australia slide into recession too at least a deep recession should be avoided as we have not seen the sort of spending excesses that often precede deep recessions.

Global business conditions indexes (PMIs) – which are surveys of purchasing managers at businesses – will be a key warning indicator.

Read full article