Money and insurance

Global stocks finish first half of the year on a positive note amid a surprisingly supportive business environment

Global stocks ended higher as the US economy continues to show signs of resiliency.

FWD Life Philippines

Global and Philippine Market Update
June 29 to July 5, 2023

Global Markets

Global Stocks ended higher as the US economy continues to show signs of resiliency. 

  • Federal Reserve (Fed) officials reached a tentative agreement to pause interest rates in June, as indicated by the recently released minutes. However, officials also all but committed to resume rate hikes this month. The minutes reflect a committee that is increasingly divided in navigating the timing and intensity of policy actions, especially considering that interest rates are currently seen as restrictive by most economists. Fed Chairman Jerome Powell reiterated the need for at least two more rate hikes in various public appearances. Concerns about core inflation, which has shown little movement in the past six months, were also highlighted in the minutes. Furthermore, the minutes indicated that the chance of the economy continuing to grow slowly and avoiding a recession is just as likely as a mild recession.
  • The US economy expanded at an annualized rate of 2% in the first quarter, as per the final revised figures released by the Commerce Department. The data contradicts the widespread speculation of an impending recession in the US. The upward revision can be attributed to stronger-than-expected consumer spending and exports. Personal consumption expenditures, a key measure of consumer spending, increased by 4.2%, marking its highest quarterly growth since the second quarter of 2021. Additionally, exports rose by 7.8%, rebounding from a 3.7% decline in last quarter of 2022.

Philippine Stocks

Philippine Stocks were rangebound as they consolidated around the 6,500 level. 

  • The Philippine weather bureau has officially declared the onset of El Niño, which is anticipated to bring dry spells, drought, and potentially stronger typhoons. Although the current El Niño is considered weak, models indicate a significant probability (over 56%) that it will become moderate or strong in the final quarter of this year. According to Nicholas Antonio T. Mapa, a senior economist at ING Bank N.V. Manila, El Niño is expected to have a detrimental impact on the economy, particularly on agricultural production which is likely to weaken. As a result, the first quarter of the year is expected to be the peak of growth with the next quarters showing weaker expansions.
  • According to the World Bank, the Philippines maintained its lower middle-income status in 2022. The Philippine government has set a target to transition to an upper middle-income economy by 2025. The World Bank believes that the country is “on track” to achieve this goal as it continues to recover and implement reforms. Michael Ricafort, Chief Economist of Rizal Commercial Banking Corp. expects the country’s GDP growth to stabilize around 6% in 2023 and beyond. He points to factors such as strong remittances, low unemployment, increased infrastructure spending, and a rebound in tourism as drivers that will contribute to the country’s progress towards middle-income status.

Philippine Bonds

Philippine Bond yields shifted higher as policy rates are likely to remain elevated.

  • The Bureau of Treasury (BTr) partially awarded a reissued 10-year treasury bond with a remaining life of nine years and two months at an average rate of 6.562%. This was higher than below 6.243% yield quoted for the paper when it was offered last June 27. This was a significant spike in yield as the risk of further rate hikes by the US Fed led investors to ask for a higher premium.
  • Inflation continued to slow for a fifth straight month in June, reaching its lowest level in 14 months. Preliminary data from the Philippine Statistics Authority (PSA) reveals that the consumer price index (CPI) dropped to 5.4% in May from 6.1% in May and June 202.2. This marks the first time in over a year that inflation has fallen below 6%. Core inflation, which excludes volatile food and fuel prices, also eased to 7.4% in June from 7.7% in May. Despite these improvements, there are still upside risks to inflation, including potential increases in transport fares and minimum wages, ongoing supply constraints for essential food items and the El Niño weather condition.


FWD Guidance: Uncertainty leads to downside risks, but diversification and a long-term investment horizon still provide the best chance for financial success.

Sources: (1) (2) (3) (4) (5) (6)

Disclaimer: The purpose of this article is to inform and should not be taken as an advice or offer to purchase securities. Seek professional advice before making a decision based on this presentation. Information given does not represent the views of FWD and its agents and employees.