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Short-Lived Cheer 🎄

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!

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