Important information - the value of investments and the income from them can go down as well as up, so you may get back less than you invest.

GROWTH is the focus this week, with earnings season in full swing and a raft of GDP announcements on both sides of the Atlantic.

Can we avoid recession?

One of the big unknowns this year is whether the US, UK and Europe are heading for an interest-rate-fuelled recession. Typically, central banks tighten monetary policy until something breaks, and many observers think the unprecedented speed and scale of interest rate hikes in the past year make a sharp economic slowdown inevitable.

But this week’s flurry of GDP data on either side of the pond might cast some doubt on that gloomy assessment. Growth in the first quarter is expected to be positive. In Europe that represents a recovery from the decline in activity in the fourth quarter. Growth is pencilled in at 1.3% year on year. The key driver is the 45% fall in gas prices since December but rising exports to China since it re-opened are a factor too.

In America, a slowdown in the rate of growth is expected from 2.6% to 2% but that is still safely in positive territory and suggests that households and businesses may have become more relaxed about rising rates than in the past. That might be a product of more fixed-rate loans than has been the case historically. In which case the pain may simply have been deferred. But, for now, it does continue to make the case for a ‘soft landing’.

Tech earnings under the spotlight

This week sees earnings season really move into top gear. There are results right across the board, with the focus on banks shifting from the US to Europe. Barclays, NatWest and Deutsche are all reporting. There’s a raft of consumer stocks too, with Coca Cola, Colgate-Palmolive and Nestle announcing first quarter numbers. And the fragile housing market is in focus, with numbers form Persimmon and Taylor Wimpey.

But most attention will be focused on the technology sector, which has been the driving force behind this year’s strong start in the markets. The prospect of lower interest rates later in the year has rekindled interest in tech stocks, which are particularly exposed to the cost of borrowing. This week we will see whether that renewed enthusiasm is also justified by trading. We have results from Google-owner Alphabet, Amazon, Facebook-owner Meta and Microsoft.

Getting ready for a break-out?

Markets have been locked into a trading range for a year now. Strip out the top ten or so mega-caps and everything else is really moving sideways. And the market’s valuation has moved sideways too, with the US trading at between 15 and 18 times earnings and much of the rest of the world in the low teens.

For that to change, and for markets to break higher, a few things need to happen. Earnings need to come through as expected. Central banks need to pause their tightening cycles. For that to happen we need to see a more decisive fall in inflation and a Goldilocks scenario of only a mild slowdown in activity at worst. That’s all possible, but it’s not a given. Until we are sure which way these factors are going, markets could remain volatile.

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.

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