Daily Alert – Wednesday 19th January 2022: End of world probably overstated

Mark NugentDaily Alert, Jan 2022

Daily Alert – Wednesday 19th January 2022: End of world probably overstated

Good morning.

We are risk-off. Equities are dropping like a stone and bond yields are rising with the US 10-year yield expected to go through 2 percent for the first time since July 2019 and the 2-year already above 1 percent for the first time since February 2020. Fears stalk the market that the Fed will raise interest rates by 50 basis points in March. It’s the end of the world. Or is it? Well, yields are close to pre-pandemic levels which is what you would expect as we go post-pandemic. The market is over-reacting. And we like over-reactions, don’t we? As for equities, their precipitous fall takes them down to levels not seen since…eh, well December in the case of the S&P500.

We will trade the reversal. That works.

Elsewhere, Bank of Japan Governor Kuroda said, “raising interest rates is unthinkable”. That puts the bank firmly in the ECB camp, in contrast to the Bank of England/Fed camp of expected rate hikes.

German inflation hits 5.7 percent, as expected. UK inflation hits 5.45 percent against an expectation of 5.2 percent.

I await the equities reversal…

We’ll be back tomorrow.

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