Who decided to steal Christmas
A certain relaxation in anticipation of the holiday reigned over the markets last week
It looks like the world's key central banks have decided to steal Christmas, or at least a sweet morsel of it, from the children of investors and speculators. As early as last week, relaxed anticipation of the holiday reigned in the markets. I even remembered the tradition of the Santa Claus Rally, when markets rise before Christmas, and then everyone gets great bonuses in their Christmas stockings. And even at the beginning of this week, it seemed that optimistic expectations were only being confirmed. Positive data on US inflation inspired the markets, and they apparently decided that the worst was already behind us. And Wednesday's Fed meeting was awaited by investors with the same gusto as Brazilian fans awaited their football team’s match against Croatia. The end result was similar. At the same time, at first, the head of the Fed, just like Neymar, justified the expectations placed on him. The Fedrate rose by only 50 basis points - from 3.75-4% to 4.25-4.5%, slowing up after a series of 75-point increases.
It seemed that one could go to bed happy, not have to fret a penalty shoot-out, and prepare for the holidays. But it was not to be.
Because after the Fed's decision itself, there was a statement by the head of the Fed, which echoed in investors’ ears: "I wouldn’t see us considering rate cuts until the committee is confident that inflation is moving down to 2% in a sustained way." After that, the markets were upset and turned around. And on Thursday, the European Central Bank finished off the speculators by raising the rate by the same 50 basis points. Yes, and its head, Christine Lagarde, said that the markets are somehow too optimistic and are incorrectly assessing regulators’ intentions. This optimism in the stock markets has long irritated central banks, firstly because it makes it difficult to fight inflation. Secondly, it does not allow for inflation bubbles to be popped normally. This is a problem with which, at the very least, the Fed is coping, especially in the technology sector, where in fact, these bubbles were the prominent.
No wonder Elon Musk is no longer the richest man in the world. Yes, and he was also forced to periodically sell shares of Tesla, carried away by his new toy, Twitter, which, it seems, he has first and foremost decided to break. One way or another, representatives of the central banks have several times pointed out to the markets that they should not get carried away with overly optimistic expectations. As a result, December is already becoming a negative month for the markets. The S&P500 index will open on Friday at around 3895 points, although more recently it looked above 4000 points. On the other hand, the Ukrainian segment of Eurobonds remained almost unchanged at the end of the week. When you lie at the bottom, you don't have to worry too much about a storm coming on the surface of the ocean. And the main event on the market is the attempt by Ukrzaliznytsia to restructure its debt.
In Ukraine, inflation even slowed down in November. In synchrony with its allies. In November, paradoxically, the blackouts helped. Attacks on infrastructure will have a negative impact on our inflation and economy in the long run. But in the short term, they have led to the fact that the fruits and vegetables we have faced difficulties storing have apparently now been thrown onto the counter in large quantities. We were also pleased with the statistics for the third quarter, which was marked by a significant improvement in the economic situation compared to the second. But it is difficult to say how relevant these figures are, because problems with electricity will affect economic activity first and foremost. But the NBU’s reserves continue to grow, having almost reached pre-war levels, actually, as well as determining the stability of the national currency.
The hryvnia this week was a model of stability among world currencies. Even the exchange rate under the Ukraina Mall in Kyiv remains stable and does not go far from 40 hryvnia per dollar. And then Orban’s obstruction was finally pushed aside in the EU, which partially met the demands the blackmailer’s demands, thus making it possible to guarantee 18 billion euros from the EU for 2023. This also means a stable flow of new currency into the reserves of the National Bank. Against this backdrop, opportunities in the Ukrainian bond market now look very sweet. After all, you can buy annual government bonds with a yield of 25%, which disrupts both next year’s inflation and potential devaluation, which, if it happens, will only be ordered by the Ministry of Finance, which will really need it to fill the budget.
PS Motivation will almost always beat mere talent.
Norman Ralph Augustine
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