It’s a busy week ahead in terms of economic releases, with a lot being crammed in as markets start to wind down for the Christmas break. There’s key inflation data along with several prominent interest rate decisions which will give investors much to reflect on in what has been a volatile 2022 for markets. It looks like (barring a very strong run up to Christmas) it will be a negative year for most investors, but it’s worth keeping perspective and not making any short term decisions which will have long term consequences.
We haven’t seen any data from the Irish market, but the Investment Association in the UK reported last week that it looks set to be the first year of outflows from retail investment funds in more than a decade. Whilst the decision to divest is more than appropriate for some investors based on their retirement and overall financial plans, we know that this is not the case for the majority. It is an oft repeated mantra, but although markets have changed in 2022 that doesn’t mean your personal circumstances and long term financial goals have to. Inevitably, human behaviour will play a predictable negative role for some investors but those with a financial advisor to keep them on track are likely to fare better than those without.
As always, if you wish to discuss anything in this newsletter in further detail, please do get in touch.
Weekly Investment News
The recent market rally in US equities stalled last week on the back of strong economic indicators which did little to dampen inflation expectations. On Tuesday, the US ISM Non-Manufacturing PMI showed an expansion in services. Likewise on Wednesday the US Jobless Claims report displayed a still tight labour market rising by 4,000 jobless claims, in what is considered to be a moderate level of increase. The week was rounded off by the release of the Producer Price Index which rose by 0.3% for November. This exceeded expectations and highlights some persistent inflation in the US. Markets are awaiting an interest rate decision from the Federal Reserve this week which is widely expected to be lower at 0.5% than the previous 4 rounds of 0.75% increases. Some investors have now begun to forecast the possibility of a prolonged period of Fed tightening amid recent optimism about slowing monetary policy. In reaction, US equities lost -1.7% in Euro terms, the first weekly fall in three weeks in Euro terms. US Treasuries also sold off as a result with the benchmark US 10 Year Treasury yield gaining 2 basis points to finish the week at 3.54%.
In Europe equities also finished the week down albeit at a softer pace, losing -0.5% for the week. This comes as both the ECB and Bank of England are set to make interest rate decisions in the coming week. Market trepidation still exists as Eurozone inflation remains at a higher level than in the US. In Asia, Equities have risen considerably the relaxing of China’s Zero-Covid policy continues to be a source of optimism for economic growth in the region. The world’s second largest economy is expected to fully reopen in early 2023 despite a recent uptick in infections. Hong Kong equities gained 3.1% last week in Euro terms.
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