What about this year-end rally? Investors are still waiting in vain for a final push in the stock markets this year. In past years, SMI rose in four out of five cases in December. But this year, the leading Swiss index has dropped more than four percent since the beginning of December.
Last Thursday was a dark day: SMI fell 2.51 percent. The German DAX and the American Dow Jones also experienced sharp declines. Equity markets are actually pricing future developments, but they took the wrong step to Thursday’s drastic rate hikes by major central banks.
Wall Break in Exchanges
The mood is pessimistic – the fight against high global inflation is not over yet. The heads of central banks in America, Europe and Switzerland have made this clear. “Forget about the Christmas rally,” said John Leiper, chief investment officer at Titan Asset Management this week. “Fed looks more like the Grinch this holiday season.” He played the green main character of the successful US children’s book How the Grinch Stole Christmas.
Not much is expected next week – inflation data and most economic data are gone, business results won’t arrive until the new year. As of Monday, investors should already be looking at 2023. US employment figures are published at the beginning of the year – it’s a first indicator.
More rate increase
Commerzbank economist Ralph Solveen explains that a significant reduction in inflationary pressure is not expected, as the ongoing labor shortage in the US has increased wages there. Therefore, further rate hikes by the Fed should be expected. The same is true for the European Central Bank (ECB). Because it is not clear whether inflation has passed the peak in Germany. “At the same time, there are increasing signs that the sharp rise in interest rates around the world is starting to take effect. German industry is feeling it too.”
In this country, the Swiss National Bank (SNB) and economists expect inflation to reach the target 2 percent again in 2023. This is good news for the stock markets, but in this case, the proof will only come in the new year. As such, this year’s end-of-year rally was probably stolen by the Grinch. (no)