Weekly Market Summary

💡1. Markets witnessed another volatile week in what has already been a particularly volatile year. Higher interest rates, the war in Ukraine, and persistent inflation have spared few asset classes from the sell-off, and while bonds typically provide ballast when equities head downward, a benchmark 60/40 stock-bond portfolio is down 14% year-to-date. However, while market volatility may continue, the sell-off has brought stock valuations down to much more reasonable levels, as shown in the chart, while earnings estimates have remained resilient.

💡2. 10-year Treasuries and equities have both generated over 10% of losses since the beginning of the year. In particular, the total return of 10-year Treasuries in the first four months of 2022 was -11.0% and that of SPX was -13.3%. Rolling 6-month returns of both markets were also below -10% in April. While, the MPC’s dovish rate hike and the clear message to UK rates markets that terminal rate pricing is too high at 2.75% leaves scope for short rates to fall which in turn may present a near term headwind for cable. Sterling fundamentals continue to warrant underperformance against Commodity FX (AUD, NZD, CAD).

💡3. U.S. supply-chain stress has intensified because of China’s zero-COVID tolerance policy, and this could limit, but not eliminate, the disinflation in U.S. goods prices over the next couple of months. These pressures are coming from elevated commodity prices and supply-chain disruptions caused by COVID-19 lockdowns in China and decisions by some governments to safeguard domestic food security by restricting exports. The U.S. Federal Reserve’s more hawkish stance and intent to stabilise local bond markets will also be a factor in monetary policy decisions. Inflation in these markets has risen beyond central bank comfort levels, necessitating more prominent steps to rein in inflation expectations and mitigate the possibility for a prolonged period of subdued growth. 

💡4. Almost all central bankers in the US and Europe agree rates must rise to tackle soaring inflation. Monetary policymakers and markets are trying to assess where lies the neutral, level of rates — the optimal level where an economy is neither overheating nor being held back. The neutral rate, where price pressures cool and output is near capacity, cannot be measured, and only estimated. It is also a moving target that changes over time. Fed raised interest rates by 50 basis points to 1 per cent at their last vote. Lagarde has made clear that the ECB, which has yet to raise its deposit rate from minus 0.5 per cent but is expected to do so for the first time in a decade in July, aims to “normalise” rather than “tighten” monetary policy, moving towards the neutral rate but not beyond it.

You can find the latest "Weekly Market Summary" 📔 here: https://drive.google.com/file/d/1CVG69uA4CpX3Xgmz_fNEbXXpf-UBvGlS/view?usp=sharing

                                                                                        

                                 ————————————————

One of the must-ask interview questions for banking and finance is: “Have you read any news recently?”, with the follow-up questions: “How would you link this news to the market and what investment suggestions would you give to your clients based on this news?” 

.

Showing your market sense and ability to provide feasible investment ideas would help to differentiate you from other candidates. Therefore, apart from the weekly news update / investment insights, we have also generated this Weekly Market Summary for you to have a quick understanding of the market development and tips to answer some hot discussion topics. Take a look of the summary and WhatsApp us in the group if you have questions."""