Last week was marked with optimism as inflation in the US inched lower. This left the markets cheering, the Nasdaq saw its highest single-day gain in the last two years, and the Indian markets too joined the party.
But that optimism was short-lived. Over the previous week, Nasdaq lost 2% and the Nifty lost 0.2%.
What’s up?
We might seem Grim-Reaper-esque, with our weekly pessimism, but hear us out, and see what else happened that doesn’t really give us the “inflation is gone” signal.
There is good news!
US CPI recorded a 7.7% rate in October 2022, a smaller rise compared to the 8.1% from September 2022
Indian CPI print showed a 6.8% inflation rate compared to September’s 7.4%, fairly in-line with expectations, but lower
But,
Inflation is still above comfortable ranges set by both countries
Rate hikes are still to be expected. In fact, the US Fed Chairman has been very vocal about a reversal in the monetary policy being far away
The rate hikes are yet to show their effects on a slowdown in earnings, higher unemployment and credit repayment going bad
Inflation might have shown a decline, but the worst isn't over. Somewhere, the markets have been factoring this in. Post-inflation rise, the markets have been tepid - indicating no excess optimism, and not factoring for a reversal in the situation.
The good-old dip buying is all we want for Christmas!