Weekly Market Wrap | 4 November 2022

Another jumbo rate hike

As expected, the Federal Reserve delivered another 0.75% rate hike on Wednesday, taking the target range to 3.75–4%.

During his press conference, Fed chairman Jerome Powell signalled a change in the Fed’s policy path. The pace of rate hikes is going to be slower, but the terminal, or peak, rate is likely to be higher than what officials envisioned during the September meeting.

By raising rates more gradually, it is less likely the Fed will overshoot and trigger a deeper recession than necessary. But with “no sense that inflation is coming down” despite multiple rate hikes this year, interest rates are expected to remain higher for longer to bring inflation back to the Fed’s 2% target.

What the terminal rate will be is still anybody’s guess. But until we see concrete evidence that inflation is waning, higher borrowing costs are here to stay.

US labour market continues to overheat

The US labour market beat consensus estimates by more than 30%, adding 261,000 jobs in October, and continued to be a major thorn in the Federal Reserve’s side since their battle against runaway post-COVID inflation began. 

Image: Financial Times

Record-high levels of consumer spending and saving are feeding labour shortages, which are in turn driving wages up and adding fuel to the fire. While the Fed is determined to sustain rate hikes well beyond expectations to loosen the labour market, the US midterm elections saw President Joe Biden denounce the Fed’s strategy of trading jobs for lower inflation.

Musk takes the reins at Twitter

The drama-filled acquisition saga surrounding Elon Musk and Twitter finally came to a close last week, with the world’s richest man going through with his initial offer to take the company private for USD 54.20 per share, in a transaction valued at USD 44 billion. 

However, the frenzy did not end there, with his first full week at the social media behemoth being nearly as chaotic as the months that preceded the buyout. 

Musk dissolved Twitter’s board of directors and announced a 50% reduction in the company’s workforce (including senior management). He attributed the downsizing to a major drop in revenue, with the company losing close to USD 4 million per day.  After employees were tasked to work round the clock and generate ideas for new products, Twitter announced a subscription service – USD 7.99 per month for its blue-tick verification.

Musk claims to have several ideas in the bag for Twitter’s overhaul. Only time will reveal whether he acquired the company to transform it for the better, or to serve a hidden agenda.

Market stats

The information provided herein is intended for general circulation and/or discussion purposes only. It does not account for the specific investment objectives, financial situation or needs of any individual. The information in this document is not intended to constitute research analysis or recommendation and should not be treated as such.

This does not constitute an offer or solicitation to buy/sell any financial instrument or to participate any investment strategy. No representation or warranty whatsoever (without limiting to accuracy, usefulness, adequacy, timeliness or completeness) in respect of any information (without limiting to any statement, figures, opinion, view or estimate). Syfe does not undertake an obligation to update the information or to correct any inaccuracy that may become apparent at a later time. All information presented is subject to change without notice. Syfe shall not be responsible or liable for any loss or damage whatsoever arising directly or indirectly as a result of any person acting on any information provided herein.

The information provided herein may contain projections or other forward-looking statement regarding future events or future performance of countries, assets, markets or companies. Actual events or results may differ materially. Past performance figures are not necessarily indicative of future of likely performance. Any reference to any specific company, financial product or asset class in whatever way is used for illustrative purposes only and does not constitute a recommendation. Investors should note that there are necessarily limitations and difficulties in using any graph, chart, formula or other device to determine whether or not, or if so, when to, make an investment. The contents hereof are considered proprietary information and may not be produced or disseminated in whole or in part without Syfe’s written consent.

Previous articleSingapore Bank Stocks To Buy: DBS, OCBC, or UOB?
Next articleMe and My Money: Taking a core-satellite approach to investing