Ben Gutteridge, who heads up the model portfolio service at Invesco, says the market's recent bullish mood has, counter intuitively, been fed by the banking crisis in the US.

Gutteridge believes the market has decided the collapse of some regional banks will mean interest rates don;t have to rise as much, but also won't provoke a crisis.

He's cautious on this analysis, saying that a bigger banking crisis could still happen and that would wipe out any positivity from rates pausing, or that central banks could see how the system has broadly withstood rate rises so far and interpret that as meaning there is room for rates to rise further. 

But in terms of what all of this means for portfolios, Gutteridge says the relatively low levels of corporate and household debt globally may mean demand for credit remains strong and that while banks are likely to tighten their lending criteria the relative health of balance sheets means this may not have quite as stark an impact as would have been the case historically.

Gutteridge adds that consumer and business demand for loans may also be boosted by borrowers having greater certainty about the direction of interest rates, or even by interest rates being cut in the near future. 

Indeed markets are now pricing in US rate cuts for later in 2023. 

He feels that this "marginally favours equities over fixed income" in the current climate.