The Cambridge Weekly – 28th November 2022
Markets give thanks
The last week of November is generally a quiet one for markets. Many professional investors head back to family homes in the days before Thanksgiving and will have already closed down their risk positions for the year. Few like to be exposed to markets when there are lower trading volumes in December, and this may be one of the reasons why US equity markets tend to enjoy a seasonal boost in the last quarter.
PMIs paint a gloomy picture for businesses
Regular readers will know that Purchaser Manager Indices (PMIs) surveys are important surveys of business sentiment. These surveys measure businesses’ own assessments of whether conditions will improve or worsen in the near future, then aggregate the results for a mark out of 100. These surveys have been a surprisingly reliable indicator of future growth, where marks above 50 indicate expansion, and anything below that points to contraction.
Continued labour market tightness keeps pressures
Remember when inflation was supposed to be ‘transitory’? In the heady days of mid-2021, when lockdowns were easing across the developed world, a slew of bottlenecks in global supply chains saw prices climb quicker than at any point since the global financial crisis of 2008. Most analysts – us included – thought these were teething problems in the post-pandemic recovery: sharp, but ultimately short. But in October 2022, the UK recorded 11.1% annual inflation, the highest level in over four decades. Prices continue to rise all over the world, despite intense central bank efforts at containing them.