What to make of the market summer squall

Conditions have stabilised after a turbulent few weeks in financial markets, and we expect the rebound in equity markets over the past week or so to continue. Our assessment is that the market fallout from the weak early August US data was disproportionate and in large part reflected the rapid unwind of crowded positions in some markets. While the risk of a recession in the US has increased a little, there are few signs of a more substantial crisis brewing. As such, we are sticking to our optimistic forecasts for equity markets and “risky” assets more broadly.