Prospects of cooling inflation in the US has led investors to anticipate the potential that the Fed will raise rates by 50bps at its December meeting.

Typically, decreasing interest rates is positive for equities, and the S&P 500 index finished above the 4,000 level for the first time in two months on November 22nd.

The last week of October gave mixed signals to investors, with US Q3 GDP increasing more than expected despite a number of headwinds; and also a mixed Q3 earnings season. Chances of a ‘hard landing’ are weighing on investor sentiment and exacerbating volatility.

Since the economic symposium in Jackson Hole last month, central bank hawkishness has continued. The selloff in bond markets has been significant this month, and the US Dollar has continued to strengthen.

Investors were focused on the Jackson Hole economic symposium this month; with policymakers’ consensus being that an increase in interest rates is necessary to counter inflationary pressures.

Over July, equity markets such as the S&P 500 posted its best monthly gain since November 2020, rising 9.1%. This strong performance came despite the multiple headwinds and uncertainties which markets continue to face.