Central Banks Tighten in Unison, Equities Defy Expectations

Global central banks are taking a synchronized approach to tightening monetary policy, raising concerns about risk assets. However, equities remain near record highs due to strong earnings growth.

The Federal Reserve has begun a new hiking cycle, while the European Central Bank continues to raise rates in response to energy-driven inflation. The Bank of Japan has accelerated its gradual normalization process in response to persistent yen weakness.

Ordinarily, a synchronized tightening cycle would raise concerns about risk assets. Yet markets have taken these developments largely in stride, with equities near record highs as growth and earnings remain strong.