Most markets were soft but stable last week while US markets were down a more significant 3%, led by the large US tech stocks.

Volatility crept back into markets, especially in the US, last week as China’s COVID woes weighed on markets early in the week before the S&P 500 rose by 3% in a few hours after US Fed chair Jerome Powell intimated that the rate of interest rate hikes might at least slow down from here.

A quiet black Friday in the shops perhaps pleases the Fed more than the retailers...

Fed officials sought to impress upon markets the notion that it would take more than one apparently weaker inflation print and an impending recession to pause this US rate hiking cycle. Headlines like “Housing industry braces for a downturn, but investors are piling in” neatly summarise the tone of a market where both the rate cycle and resultant recession has been so well telegraphed. The fact that both are so well priced in by markets means that any incrementally better (or at least less bad) news can cause markets to rebound sharply with particularly beaten down stocks or sectors jumping by the most.

Early last week it looked like an imploding crypto exchange might be the next leveraged player that the Fed hiking cycle had broken but by the end of the week early signs of a peak in inflation had sent markets rocketing higher.

US markets snapped a month-long winning streak and fell back by three percent while UK, European and Asian markets were up strongly. The negative sentiment in the US centered on the prospects for tech stocks, and the Nasdaq was down almost 6% with market heavyweights Apple, Google, and Amazon down by around 10% as investors fretted over the dual headwind of declining earnings and higher interest rates

Markets capped a very strong month with a strong week and for an apparent kaleidoscope of reasons including not as dismal as expected earnings, anecdotal evidence of slowing inflationary pressures in the US and even some economic resilience in recession bound and energy starved Europe. Against these ‘almost positives’ there was enough in the news to make a 10% rise in markets during October seem improbable on the face of it - including an overall increase in inflation (and medium-term interest rate expectations), tightening US dollar liquidity conditions, a deepening of economic woes in China (not to mention the geopolitical implications of a harder line Chinese Communist party after the recent 5 year congress ) and an ever more belligerent Russian leadership.