Daily Alert – Thursday 1st December 2022: Markets act like Powell pivoted

Mark NugentDaily Alert, Dec 2022

Daily Alert – Thursday 1st December 2022: Markets act like Powell pivoted

Good morning.

Last night, I looked at the charts after Fed Chair Powell had spoken and I saw that equities had leapt upwards, and the USD was down. I assumed Powell had “pivoted”. Then I read that he had said interest rate hikes could be scaled back “as soon as December”. As I was in “pivot” mode, I thought he meant interest rates could be “reduced” as soon as December. But that’s not what he said. He said the hikes could be scaled back. In other words, a reduction in the rate of increase, a deceleration. Not a reduction in speed, a slowing down. He then said, perhaps confusingly to some, that “slowing down at this point is a good way to balance the risks” but that controlling inflation “will require holding policy at a restrictive level for some time”.

In other words, he said nothing new. Nothing new at all. Completely in line with what he and other Fed voters have already said.

Yet equities shot upwards, and the USD fell.

Frankly I have no explanation for this. Many commentators have said it makes no sense. I am keenly looking for a reversal of the equity rise and may enter intra-day if I see it happening.

We also had some good news from China. Guangzhou and Chongqing announced an easing of COVID restrictions, and, in Zhengzhou, the site of a factory making Apple stuff that has been the scene of worker unrest, officials announced the “orderly” resumption of businesses.

I’ll be back tomorrow with your Performance Report for November and year-to-date.

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