Equities End the Year on a Sour Note
Equities were down on the week as December will once again disappoint consensus expectations. The narrative was spun that December is historically one of the best months of the year from an equity performance standpoint and therefore we should expect a sharp year-end rally.
As traders turn off their screens and head for the doors for a long weekend, market data was full of mixed signals. Mister Market was more Krampus than Santa Claus this week sending both bonds and stocks lower -1.2% and -2.9% respectively.
As we approach 2023, please find the following articles from the BTC Capital Investment Team, discussing top economic themes and their potential impact in the New Year.
The two dominant themes running through the U.S.
We presume all cannot wait for 2022 to say goodbye. U.S. equities, as measured by the Russell 3000 Index, are currently down 19.8% year-to-date (YTD), which may be its worst calendar-year drawdown since 2008 ( 37.3%).
2022 has been a year of transition away from unprecedented quantitative easing where central bankers flooded markets and government coffers with money, to the start of the tightening of the monetary policy belt.
The two dominant themes running through the U.S. economy in 2022 have been sluggish GDP growth and elevated inflation. From the growth perspective, this year has been the tale of two halves with the first two quarters seeing negative results for GDP followed by a positive third quarter and what is anticipated to be a continuation of upside growth in the fourth quarter.
Inflation Drops – And Sets a Trap for the Bulls
Equities rallied on the week in anticipation of a better-than-expected Consumer Price Index (CPI) report and a dovish pivot from the Federal Reserve.
Employment
Employment data was at the forefront of this week’s economic calendar. Despite concerns regarding an impending recession the employment picture continues to be resilient as the unemployment rate remained unchanged at 3.7%.
Stocks Rally as Powell Guides to 50 in December
Fed Chair Jerome Powell signaled the pace of rate hikes would slow and could come as soon as the next meeting in December.