The pre-Christmas ‘quiz’ that not many want to play
As the end of the investing year draws nearer, markets remain on edge, questioning everything that it thought it knew the answers to only very recently. But last week, central bank and government policy, inflation pressures from supply chain issues, and the latest developments from the virus that refuses to be defeated, threatened to leave investors in a state of puzzlement.
November 2021: capital market returns review
November ended with markets dominated by rising COVID infections and hospitalisations in parts of Europe as well as the emergence of the new Omicron variant. Having risen much higher during the month, developed market equities ended the month up only 1.1% – thanks to positive return contributions from the US and Japan.
Powell turns into Scrooge – with unfortunately timing
The financial commentariat loves a good change of narrative. That is what they got from Fed Chair Jay Powell’s speech on Tuesday, when he appeared to reverse two years of monetary policy thinking in a single afternoon. Powell had spent much of this year preparing financial markets for a slight reduction in asset purchases, reassuring them that zero interest rates were not going anywhere and proclaiming that inflation was merely “transitory”. But now that US inflation has hit its highest level in 30 years, there is no more Mr Nice Guy. The Fed Chair told US Congress that bond-buying could be tapered quicker than expected to combat rising prices and that the central bank should retire the “t” word when describing inflation. It was his most hawkish-sounding speech since the start of the pandemic, and it gave news outlets a juicy narrative shift: after months of mollycoddling, Powell the disciplinarian is here.
Turkey: the poster child for EM risks
Turkey is at “war”. That was President Recep Tayyin Erdogan’s assessment last month, comparing the nation’s current struggles to its fight against occupiers nearly a century ago. Exactly who or what Turkey is fighting against is unclear – this war is not a physical one but an economic one, against a vast array of foreign “opportunists”, “doomsayers” and “global financial acrobats”. But Erdogan’s government will fight with fervour, nonetheless. According to Erdogan: “With the help of God and the support of our people, we will emerge victorious from this war of economic independence”.