November Market Commentary 2022

During the Autumn Statement, the Office for National Statistics, much like the BoE a few weeks prior, presented a gloomy outlook for the UK economy, where a protracted economic slump is expected to last until 2024. The picture is somewhat different in the US. Despite signs that the housing market is slowing sharply, the labour market continues to generate job numbers above expectations.

Inflation looks to have peaked in the US. The October figure of 7.7% undershot expectations of8.0% and is now well below the 9.1% reached in June. Although inflation is expected to fall further in the coming months, a slowdown in the labour market, which remains strong, is likely to be necessary to get back to the 2% target. Following the release of the lower-than-expected October inflation rate, markets tapered their expectations for the December Fed meeting to a 0.5% interest rate increase, following 0.75% hikes in the four previous meetings. As the pace of interest rate hikes slows, investors are now focusing on what level central banks will peak at and for how long this peak rate will be sustained.

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