Rising inflation pressures forced central banks around the world to reverse the loose monetary policy. A faster-than-expected tightening of the financial conditions weighs on the global economy.
Increasing uncertainty about a possible recession in late 2022 or early 2023 could keep pressure on risky assets. On the labor, house-hold, and corporate side, however, the US economy is still sending some reassuring signals.
In Europe, forecasts for inflation and GDP growth have been revised upward and downward, respectively. As a result, the ECB is forced to end the era of negative interest rates in 2022.
Fiscal stimulus in the form of higher defense spending, support for safer domestic/regional supply chains and faster energy transition (accelerated by the Russia-Ukraine conflict) is a well-received support to bolster employment and ultimately prevent a severe recession.