Market Review from Realm Investment Management – week ending 4th November 2022
There were three big events last week. Here’s what happened:
On Wednesday the Fed announced its latest interest decision – which was a further 0.75% hike. The signal from Chair Powell was that the central bank is likely to slow the pace of future increases but the level at which interest rates finally top could well be higher than the market currently anticipates. For those seeking clues as to when the Fed might pivot the message was made clear “it is very premature to think about a pause in our interest rate hiking cycle“…”we have some ground left to cover here — and cover it, we will.” US CPI data for October, due to be released on Thursday will help investors judge how well the Fed is doing in its efforts to tame inflation and the likely path for rates going forward.
On Thursday the Bank of England also lifted rates by 0.75% to 3%, the highest since 2008. Governor Andrew Bailey indicated that future hikes may not be as aggressive although the BoE anticipated that inflation would remain above 10% for the next six months.
On Friday the US non-farm payrolls report showed that more new jobs were created in October than expected (not what the Fed wants to see) but the unemployment rate did jump to 3.7%.
At the start of this week and ahead of the US mid-term elections tomorrow, the US 10-Year Treasury Yield is printing above 4.2%, close to the 15-year high recorded in October and the British Pound has rallied back above 1.15 versus the US dollar as UK investors await Jeremy Hunt’s autumn statement due next week.
..and of course, the war in Ukraine remains the leading geopolitical risk. President of Ukraine Zelensky claimed today that Russia is planning more mass strikes on his country’s infrastructure.
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