Monthly Review - August 2022
We mentioned in last month’s commentary that “investors are conscious of the fact that central banks, whilst anxious to look as if they are doing something about inflation, are actually very restricted as to the extent of monetary tightening that is possible, without breaking something. This being the case, sentiment is now moving closer to our view that the Federal Reserve are likely to slow and even stop raising rates later this year and might even pivot to cutting rates in 2023. This prospect, together with extreme bearish sentiment, resulted in renewed optimism for long duration risk assets, or at least some significant short covering. This helps explain the sharp rally, especially in growth equities, over the past month”.
This sentiment persisted into the first half of August and, as the chart below shows, the Nasdaq added another 6% over the first two weeks of the month, taking the gain from mid-June lows to mid-August highs to +23%, or put another way, this move retraced 50% of year-to-date losses…….which presented our “friends” at the Federal Reserve with something of a problem because it is difficult, if not impossible, for any central bank to fight inflationary pressures and anchor inflationary expectations if investor sentiment, in turn impacting consumer sentiment, is so positive.
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LeifBridge is a trading name of Shard Capital Partners LLP. Shard Capital Partners LLP is a limited liability partnership, registered in England with registration number OC360394. Shard Capital Partners LLP Registered office:36-38 Cornhill, London, EC3V 3NG.. Shard Capital Partners LLP is authorised and regulated by the Financial Conduct Authority in the United Kingdom, reference number 538762.
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