Last week promised to be a busy week for markets, and so it proved to be. Tuesday’s US inflation figure was followed up by a rapid-fire round of Central Bank decisions (more detail below). It certainly had the sense of front loading a lot of the work as people begin to wind down for the Christmas break – something we’re very much looking forward to! This is the last Weekly Investment News of 2022, and we would like to take this opportunity to thank all our readers for their thoughts and comments throughout the year – which are always welcome. We hope everyone enjoys a well-earned break following what has been quite the year for investment markets, with perhaps one eye on 2023 and the year ahead.
With that in mind, we’re busy putting the finishing touches on our own 2023 Investment Outlook and we look forward to welcoming you on 10 January to our regular January Investment Webinar. Registration details available here. We’ll update you on our current positioning and outlook across all the main asset classes. We would also be interested in getting some questions in advance and hearing your views. Therefore, a final question to see out the year – How would you rank the prospects for the five main asset classes for 2023? Please see the survey link. We would appreciate your feedback on this question.
As always, if you wish to discuss anything in this newsletter in further detail, please do get in touch.
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Last week saw The Federal Reserve, ECB and Bank of England all raise rates by 50 basis points. Preceding this announcement US equities made gains on Tuesday as the US inflation figures came in lower than expected. The year-on-year Consumer Price Index rose 7.1%, the smallest gain in 11 months, while the Consumer Price Index increased by a mere 0.1% for November. The prospect of slowing inflation led to positive sentiment in markets preceding the Fed’s interest rate decision. Within the US, a 50-basis point rise was an almost foregone conclusion for many. Markets were however, still left waiting for the ensuing comments from Fed Chair Jerome Powell following the rate rise announcement on Wednesday. Reaffirming that the fight against inflation is not over, Powell struck a somewhat hawkish tone. This caused US equities to give back their previous gains as investors were tentative on the future pace of rate increases from the Fed. US equities finished the week down -4.3% in Euro terms as a result.
Within Europe, news of rate decisions and the prospect of higher rates for longer meant European equities felt a similar drop from Wednesday onwards. The ECB’s messaging suggested to investors that there is set to be a steady pace of higher rates within the Eurozone for a longer period than previously forecast. The prospect of further tightening from the ECB was viewed by many as more hawkish than the likes of the Federal Reserve. Slowing economic growth also remained an issue for investors in Europe. The yield on the German 2 Year Bund, which is sensitive to rate expectations rose to 2.5% on Friday, above the German 10 Year Bund. Despite this, there was however some positive news in the Eurozone with Friday’s composite PMI displaying easing inflationary pressures for manufacturing and services as supply chain problems diminish and demand has lowered. European equities finished the week down -2.8%.
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