Market Outlook - What will drive the markets in 2023
The New Year can be full of surprises, as there exists a vast amount of uncertainty and a mix of negative outlook & optimistic hopes globally. The main factors in focus are Fed's interest rate hikes, fear of global recession, and covid situation in China. American Market The difference between the US 10Y bond yield and US 3Y bond yield has turn negative. This is considered as a sign of upcoming recession. The 3Y bond yield is trading around current yield of 3.98% and the 10Y bond is trading around 3.56%, the difference being -0.42%. How come the negative difference a sign of recession? The logic behind this goes back to concepts of present value of money and also the relation between time and risk. Longer the time, larger will be the risk that an investor is taking (be it interest rate risk, inflation risk, market risk, default risk or any other risk). Hence, he will demand a higher rate of return on his investment. Also, a rupee today worth more than a rupee tommor