In a week that saw the broader market's 2023 pivot hope dashed, investors are examining the overnight movement with great detail to determine if the collapse in risk sentiment is part of a larger and more complex darker economic issue or, with the significant risk events behind us, will investors see calmer waters into year-end.
If Powell started the hawkish wheels in motions, Lagarde was the coup de grace which sent short sellers ruthlessly running roughshod through the global pivot camps. Indeed investors will now need to deal with a hawkish send-off to 2022 that could last well into 2023
And with global economic data undershooting expectations, it's not a stretch to think investors may shift their focus from inflation and the Fed to the growing impact that the Fed's actions are likely to have on the economy as they tweak 2023 playbooks.
With the typically indulgent US consumer tightening their pursestrings against the backdrop of the Fed higher for longer mantra, it is undoubtedly tempting investors to join here comes the stagflation camp.
SPI AM's Innes on Global Markets
Stephen Innes, the Managing Partner at SPI Asset Management, discusses the market outlook and where he sees opportunities. He speaks on "Daybreak Middle East." (Source: Bloomberg)
OIL
The fall in US retail sales, where the resilience of the US consumer has underpinned US gasoline demand through thick and thin, is a worrying telltale sign of possible demand destruction coming to a gasoline station near you.
FOREX
The dollar is offering few clues today, with highly traded EURUSD showing little direction, with central banks on both sides of the Pond much more hawkish than expected. So maybe we could expect a battle of the Pond to shape the currency market into 2023
To avoid trading the "battle of the Pond", I have flipped out of the long EURUSD trade and into a long EUR cross-currency view.
On the back of the more hawkish ECB than expected, I think the EUR is set to significantly outperform currencies where central banks are either unwilling or unable to sound as hawkish (GBP, SEK, AUD, CAD).
