November has, thus far, been characterised by a plethora of events that have thrown markets back and forth. Between additional outsized rate hikes, US mid-term elections, and a highly anticipated US inflation report, investors seemed uncertain as to which way the market would turn.
US markets have been driven by mid-term elections and expectations regarding inflation and monetary policy. Most expected the Federal Reserve to raise rates by another 75 basis points at their meeting in November; however, there was hope that they would also deliver a less hawkish tone. Fed Chair Jerome Powell disappointed markets when he stated that it is “very premature” to contemplate pausing hikes and that their battle against inflation will require rates to rise further and for longer.
While the drop in inflation was well received by Wall Street, caution still remains as to how long it will take for inflation to drop back to the central bank’s target of 2%. The UK economy continues to deal with political uncertainty, high inflation, and a looming recession. Clear signs of a slowdown were evident after the UK economy contracted by 0.2% in the third quarter. While the contraction does not yet represent a technical recession, the Bank of England has forecast the downturn to last well into 2024, marking the country’s longest recession in history.