Weekly Market View from Realm Investment Management. Week ending 17th December 2021.
Markets were lower last week, giving back some of the previous week’s gains. Stocks slumped on Tuesday after data showed US producer prices were up 9.6% (year-on-year) in November, the largest jump since 2010.
The Bank of England surprised markets by unexpectedly raising its bank rate by 15 bps to 0.25% after data showed that annual inflation reached 5.1%, the highest level in ten years. Europe is not expected to follow suit as Christine Lagarde, President of the ECB, said an increase in interest rates was “very unlikely” next year.
Following the US Federal Reserve’s latest meeting, which ended on Wednesday, markets are now expecting the Fed to raise interest rates three times in 2022, a faster pace than expected, and end its asset purchase program by March. Equities rallied in response.
At the start of this week stocks are lower as investors re-assess the potential impact on economic growth of new Covid 19 restrictions and the speed of central bank response to rising inflation. Also, Joe Biden received a set-back today with Senator Joe Manchin rejecting the President’s $2 trillion economic package which means it has no hope of passing a vote in the Senate. The White House described Manchin’s decision as an “inexplicable reversal”.
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