20 February 2023

Financial markets question continuation of restrictive monetary policy

Inflation and interest rates are still at the centre of the financial markets’ thinking. The latest data from the US confirms that prices are falling, but the monthly trend in January indicates that the speed of inflation’s descent could be slow, forcing the FED to raise rates further. Investors are taking the brunt of the blow and the week passes between all-positive macro data and concerns about the consequences of a prolongation of restrictive monetary policy. Let’s look at some data from our weekly analysis updates.

In the past week, 42% of the instruments and indices used for our analysis recorded a positive change. 58% experienced a negative change. Analysing by macroclass, 52% of equity instruments and indices recorded a positive weekly variation. 5% of bond instruments and 28% of the other asset classes used for our analysis.

Improving valuations in the past week accounted for 17% of the total. The previous week, valuations that had been adjusted upwards were 28% of the total.

Among the equity sector analyses, improving valuations accounted for 9% of the total. It was still a week with little improvement in valuations in equity analyses, with investors continuing to question price developments and, above all, the consequences of a prolongation of restrictive monetary policy.

Among bond-related analyses, improving valuations accounted for 31.25 per cent of the total.

Among analyses relating to other asset classes, improving valuations accounted for 53 per cent of the total. Sentiment, currency and commodity analyses fell into this section.

Of the valuations, 19 per cent were above the short-term average. Of the evaluations, 31% were above the long-term average. Last week it was 27% and 25% respectively.