Fed minutes were encouraging but concerns increase over China

Fed minutes were encouraging but concerns increase over China

Market Review from Realm Investment Management – week ending 25th November 2022

Stocks rallied for the week helped by some decent US earnings reports and the release on Wednesday of Fed minutes from the last FOMC meeting. A number of Fed members had recently hinted that the size of the next rate hike might be less than previously expected, and this was affirmed in the minutes – “a substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate.” A hike of 0.75% next month is no longer the consensus and stocks rallied. Utilities was the best performing Sector with Energy stocks lagging as the price of oil fell sharply (today Crude Oil futures have fallen to their lowest level year-to-date).

Bonds also rallied last week – US 10Y Treasury yields have been falling since late October possibly indicating the economic slow-down in 2023 that many investors are expecting. Over recent weeks the US Dollar has also been falling relative to other major currencies, e.g. GBPUSD rose above $1.20, a level not seen since mid-August.

In the UK, the 10Y Gilt Yield briefly fell back below 3% last week, well below its panic-peak above 4.6% in October. UK PMI data showed that business activity declined for a fourth consecutive month suggesting that the economy is contracting. Even so, the Bank of England has indicated that interest rates will have to rise further to fight inflation.

Recent protests in China over the tight COVID-19 restrictions being imposed by the government have spilled over into widespread unrest. Demand concerns regarding the world’s second-largest economy have been rising as lockdowns continue and fears of a global recession are increasing.

The week ahead is a heavy one for data releases but the main focus will be on the US jobs report on Friday.

UK Market Chart 25th November 2022

US Market Chart 25th November 2022

US Risk Barometer 25th November 2022

Europe Risk Barometer 25th 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 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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