For markets, good news is bad news right now. US indices suffered their worst day of 2023 last Tuesday, following yet another example of unexpectedly strong business data.

Continued economic strength means inflation isn’t coming down quickly enough. Despite multiple rate hikes, it’s “mission very much unaccomplished” for the Federal Reserve, notes Bank of America. Its warning of further rate hikes is echoed by Goldman Sachs, Deutsche Bank and UBS, among others.

Markets have belatedly taken note. For some time, investors didn’t believe the Fed’s talk of rates staying higher for longer, but market pricing now suggests rates will peak around 5.3 per cent – in line with Fed forecasts.

A more hawkish Fed means an eventual hard landing is increasingly likely, says Bank of America, which reckons this year’s market gains could be wiped out within weeks. Like that bank, strategists at Goldman, JPMorgan and Fidelity are all sounding increasingly cautious notes. Lingering inflation concerns, higher-than-expected rates – we are, says DataTrek Research’s Nicholas Colas, “back in 2022′s market dynamic”.