Fed hawk upsets markets

Fed hawk upsets markets

Market Review from Realm Investment Management – week ending 18th November 2022


Equity markets were mixed last week following a strong advance the week before. UK and European markets were generally a little higher with US stocks giving back some of the previous week’s gains.

In the US, speeches from Fed officials were quite hawkish including one from James Bullard, president of the St Louis branch, who lifted his view of where the Fed funds rate should be to between 5%-5.25%. His comments that rate rises so far had only had a “limited effect on observed inflation” sent stocks lower on Thursday.

US recession worries increased as the 2-year/10-year yield curve, a much-watched indicator, inverted further to its lowest level in over forty years and consequently a recession is now expected by many investors. This now begs the questions, how long it will last? and how bad it will be?

Another forty-year record was also seen last week, and represents good news for US home buyers, with US mortgage rates recording their biggest weekly decline since 1981.

In the UK, Jeremy Hunt’s Autumn Statement saw the Chancellor raise taxes but put a delay on large spending cuts until after the next general election in 2024. The Government is hopeful that the £55 billion package will demonstrate it is serious about fighting inflation and will restore its credibility with international markets. The OBR forecast that went with the statement suggests the UK economy will contract by 1.4% in 2023.

UK inflation reached a 41-year high of 11.1% in October – however, most commentators do not believe this is the peak of the current cycle.

Gold, silver, and copper were lower last week, as was Crude Oil which today (Monday) fell to its lowest level since very early in January.

UK Market Chart 18th November 2022

US Market Chart 18th November 2022

US Risk Barometer 18th November 2022

Europe Risk Barometer 18th November 2022

Disclaimer: ‘Where the business has expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice. The information contained within this communication is believed to be reliable but Realm Investment Management Limited does not warrant its completeness or accuracy.

This communication is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality

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