Playing the Grinch

Stock markets are going into the festive period in a downbeat mood, as central banks this week reaffirmed their commitment to raising rates.

The prospect of a Santa rally is fading as we near the end of 2022, very much in keeping with how the rest of the year has unfolded. Going into December, there was growing optimism that policymakers could be a source of optimism going into the new year but instead, they’ve taken on the role of grinch, bringing a swift end to the celebrations.

Considering the eagerness of investors to embrace the imminent end of the tightening cycle, you can understand the positions being adopted by central banks. The faintest hint at pausing the hiking cycle now will likely see financial conditions loosen, undermining their efforts to get a grip on inflation again.

I expect the data will allow a change of heart early in the new year and central banks won’t necessarily fully follow through on what they’re signaling to the markets now. Of course, considering the numerous surprises this year, I don’t say that with enormous conviction. Expect the unexpected may well remain the mantra next year.

I get up, but I get knocked down again

Bitcoin’s revival was short-lived and it now finds itself back around $17,000. It was always going to be difficult to build on the early week gains in any considerable way and the wave of risk-aversion in the markets was enough to knock it down once more. It’s going to take some favourable headlines and significantly improved risk appetite in the markets to lift it back toward $20,000 in the near term.

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/

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