Market Update – 12th January 2022.

In the US, the New York Federal Reserve released a survey of consumer expectations on Monday, which showed households in the US had a positive outlook on the jobs market. The perceived odds of losing a job in the next 12 months decreased, and the perceived odds of finding a job after becoming unemployed rose.

Jay Powell made a bid for nomination for another 4-year term as chair of the Federal Reserve. Markets watched this closely for any clues following the minutes of the last Fed monetary policy meeting, which we talked about last week, and gave a sigh of relief following Powell’s comments that the central bank would act on inflation. He also said that he expects inflation to peak in the middle of the year, allaying fears of any dramatic increase in rates, and reaffirming our view that, whilst rates need to rise, they will be lower for longer.

Turning to China, Anyang, a Chinese city of approximately 5 million people was put into lockdown due to a COVID-19 outbreak, joining the cities of Xi’an and Yuzhou. Whilst markets drew back at the news, China’s zero-COVID policy ahead of the Beijing Winter Olympics means that a full reopening will likely follow the hard lockdowns we are seeing. Furthermore, whilst Omicron may be clouding the near-term outlook, valuations remain attractive in China for a long-term investment.

Data-wise, it is a fairly quiet start to the week as markets ready themselves for receipt of US & Chinese inflation data, US retail sales and UK GDP.

Hannah Owen, Portfolio Specialist