Powell suggested rates will stay high for some time – markets did not like it

Powell suggested rates will stay high for some time – markets did not like it

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Market Review from Realm Investment Management – week ending 16th December 2022

On Tuesday, a lower-than-expected U.S. inflation reading of 7.1% increased confidence that the Federal Reserve would slow its tightening policy. Stocks rallied and the Dollar fell.

At the end of the Federal Reserve’s two-day policy meeting on Wednesday, the central bank duly delivered the expected 0.5% hike in interest rates but stocks fell after an suggestion from Fed Chair Jerome Powell that interest rates would stay elevated for some time. This despite indications that economic conditions are easing – note the weaker-than-expected retail sales report on Thursday. The sell-off in stocks continued to the end of the week and the Dollar regained some of it’s losses.

In the UK the annual inflation softened to 10.7% in November, down from 11.1% previous month which was the highest in four decades. Projections from the Bank of England indicate that inflation has reached its peak but is expected to remain very high relative to the 2% target rate. The BoE raised rates by 0.5% to 3.5%, the highest since 2008, and the ninth consecutive increase.

In line with the Fed and BoE, the European Central Bank also lifted interest rates by 0.5%.

UK Market Chart 16th December 2022

US Market Chart 16th December 2022

US Risk Barometer 16th December 2022

Europe Risk Barometer 16th December 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 of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell investments.’

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