This week saw government bonds lead a broad market rally once more. Better news for inflation and a gradual slowdown in economic activity raised hopes that the Federal Reserve may be able to engineer a soft landing, and bond markets are now hoping for rate cuts in the first half of next year. This caps a good month for markets and fixed income and global equities made significant gains. The positivity even extended to out of favour markets like UK equities and emerging markets shrugged off ongoing problems in China to record a post a strong gain. The outlier is commodities as a modest rise in gold has been offset by a significant drop in oil and gas prices.
The rally is welcome, particularly after recent challenging conditions for fixed income assets, but central banks remain cautious about declaring victory over inflation too soon. Another reason to avoid getting carried away is the time lag between rate hikes and their eventual effect on the economy. This usually takes 12 months to two years, so there is still a long way to go before the full impact of the recent hikes is apparent.
For the following stories, please click on this link*
- Us: Bonds and Equities rise as economy shows signs of slowing
- Retail: MUS consumers splash out during key Black Friday weekend
- China: Surprise drop in manufacturing output drags on stocks
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