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Weekly comment: Should investors keep their faith in the Santa Clause rally?

Date: 06 December 2021

Weekly podcast: Market overview

This week’s host, Investment Manager, Paul Gibbons discusses the ups and downs of the past week with Head of Fixed Interest Research, Richard Carter and Equity Research Analyst, Mamta Valechha. Among the topics discussed – inflation, interest rates, as well as what markets will focus on next.

Market overview – Alan McIntosh, Chief Investment Strategist

Global equity markets continued their volatile ride last week as the scientific community grappled with the potential consequences of the new Omicron strain of coronavirus. Although data from South Africa suggests that sufferers are demonstrating relatively mild symptoms, it is really too soon to tell how fast this variant will spread and how resistant it is to existing vaccines. In the UK and the rest of Europe, Delta remains the dominant form of coronavirus and is likely to remain so for the next month or so even if Omicron starts to take hold. Rising cases have resulted in lockdowns in Austria and Germany, which for those who have experienced the joys of Christmas markets in those countries, is a serious blow.

Having maintained a fairly dovish profile, with regard to the future path of monetary policy, the Federal Reserve Chair Jay Powell changed tack last week. Recently the central bank outlined its plan to reduce the pace of bond purchasing. This tapering would see the programme wound down by the middle of next year. However, it would appear that Powell is now more concerned about inflationary pressures taking hold to the extent that the Fed will no longer describe inflation as “transitory.” At a meeting last week, he suggested that tapering might have to be accelerated, implying earlier than expected interest rate rises. Meanwhile the Bank of England seems to be moving in the other direction, with strong hints that this month’s expected rate increase will be delayed into the New Year. As ever, central banks seem to be changing their minds on a frequent basis, which questions whether they should communicate with the market ahead of policy meetings at all.

Speakers

Alan McIntosh

Chief Investment Strategist

Paul Gibbons

Investment Manager
Richard Carter

Richard Carter

Head of Fixed Interest Research

Mamta Valechha

Equity Research Analyst

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