{"id":5862,"date":"2022-05-11T08:00:35","date_gmt":"2022-05-11T07:00:35","guid":{"rendered":"https:\/\/sarasinandpartners.com\/row\/?p=5862"},"modified":"2022-05-10T13:43:54","modified_gmt":"2022-05-10T12:43:54","slug":"the-week-in-markets-11-may-2022","status":"publish","type":"post","link":"https:\/\/sarasinandpartners.com\/row\/think\/the-week-in-markets-11-may-2022\/","title":{"rendered":"The week in markets – 11 May 2022"},"content":{"rendered":"

Welcome to the weekly macroeconomic round-up, where we spotlight a few of the most significant events in the last few weeks.<\/h3>\n

Stock markets turn bearish as Fed raises rates <\/strong><\/h3>\n

As expected, the US Federal Reserve (Fed) increased its base rate by 0.5% to a target range of 0.75% to 1%. This was the first 0.5% increase since 2000, and Chairman Jerome Powell signalled that the Fed is considering implementing further 0.5% increases \u201cat the next couple of meetings\u201d. However, the likelihood of a higher 0.75% increase was dismissed, sending momentary relief through the US stock markets.<\/p>\n

The market gains made on Wednesday were short-lived, as investors digested the reality of a more hawkish Fed implementing higher rates and quantitative tightening in order to control inflation. Markets retraced their steps on Thursday, with the Nasdaq closing down 5% in its biggest one-day decline since June 2020.<\/p>\n

The Fed also announced a new timetable for reversing the quantitative easing implemented to support the economy during the height of the pandemic. The next phase of quantitative tightening is due to start in June and accelerate from September onwards. This will see US Treasury and mortgage-backed securities roll off the Fed\u2019s balance sheet at a rate of $95bn a month once the programme is at full pace.<\/p>\n

BoE raises rates and shocks investors by predicting economic contraction <\/strong><\/h3>\n

The Bank of England (BoE) followed their counterparts across the Atlantic and raised rates by 0.25% to 1%, the highest level since February 2009. Three members of the BoE\u2019s Monetary Policy Committee voted to raise rates by 0.5%.<\/p>\n

However, this more hawkish stance was offset by new BoE economic forecasts that point to an economic contraction caused by soaring energy prices and a cost of living squeeze. GDP is expected to fall by 1% in the fourth quarter and inflation could reach 10.2% by the end of the year, its highest level in 40 years. In response, he pound dropped 2% against the dollar.<\/p>\n

The BoE is treading a fine line between acknowledging that further tightening may be necessary to quell inflation and preparing for the possibility of \u201cvery sharp downturn\u201d. In contrast to its European and US counterparts, the BoE is therefore unlikely to raise rates by as much as markets expected.<\/p>\n

Market review<\/strong><\/h3>\n

US markets finished the week by suffering their longest streak of weekly losses in over a decade, as investors factored in higher inflation and interest rates impacting on economic growth. The tech-heavy Nasdaq Composite Index was once again the biggest loser in the US markets, falling by 1.5%. However, larger losses were seen in emerging markets, with the MSCI China Index falling by almost 7%.<\/p>\n

Despite investors moving away from risky assets, bond markets also had a negative week. Longer-dated government bonds were particularly badly hit, with the Bank of America Sterling +10yr Gilts Index falling by 2.4% as yields rose.<\/p>\n

\n

Important information<\/strong><\/p>\n

All details in this article are provided for information purposes only and should not be misinterpreted as investment advice or taxation advice.<\/p>\n

Where the data in this article comes partially from third party sources the accuracy, completeness or correctness of the information contained in this publication is not guaranteed, and third-party data is provided without any warranties of any kind.\u00a0 Sarasin & Partners LLP shall have no liability in connection with third party data.<\/p>\n

\u00a9 2022 Sarasin & Partners LLP \u2013 all rights reserved.\u00a0 This article can only be distributed or reproduced with permission from Sarasin & Partners LLP. Please contact marketing@sarasin.co.uk.<\/p>\n","protected":false},"excerpt":{"rendered":"

Welcome to the weekly macroeconomic round-up, where we spotlight a few of the most significant events in the last few weeks. Stock markets turn bearish as Fed raises rates As expected, the US Federal Reserve (Fed) increased its base rate by 0.5% to a target range of 0.75% to 1%. This was the first 0.5%...<\/p>\n","protected":false},"author":73,"featured_media":12550,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[28],"tags":[],"coauthors":[191],"class_list":["post-5862","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-markets"],"yoast_head":"\nThe week in markets - 11 May 2022 - Sarasin & Partners Global<\/title>\n<meta name=\"description\" content=\"Welcome to the weekly macroeconomic round-up, where we spotlight a few of the most significant events in the last few weeks.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/sarasinandpartners.com\/row\/think\/the-week-in-markets-11-may-2022\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The week in markets - 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