
Monthly Market Roundup cov. December 2022
In our monthly market roundup for December, we look at what was a disappointing end to the year for global stock markets and analyse which factors had the most impact.
Global equity markets largely ended December in decline, after a volatile year in 2022
Three major central banks – Federal Reserve, Bank of England and European Central Bank committed to raise interest rates until inflation reaches target levels
Emerging markets outperformed developed markets, with China boosted on early Covid reopening and positive government policy shifts.
December provided a disappointing end to what was a tumultuous year for global stock markets. Most regions lagged though China was boosted by earlier-than-expected Covid reopening and positive shifts in government policy. Elsewhere, the US Federal Reserve, Bank of England and European Central Bank all doubled-down on interest rate hikes to ease inflation back down to target levels. Widespread recession fears continue to loom.
Despite recent positive performance, European equities ended the last month of the year down. All sectors finished in negative territory as interest rates continue to rise and economic data remains weak.
Inflation has slowed in Germany, Spain and France, though. This is likely down to government subsidies on energy costs.
Eurozone unemployment fell to a record low in October, but a recent survey indicated that businesses are slowing down on hiring. Industrial production fell, as business scale back due to high gas and electricity prices.
UK markets also ended the month down. An environment of rising interest rates and recessionary fears dragged on stocks.
There was slightly better news on the inflation front as it fell between October and November. Andrew Bailey, Bank of England governor now believes inflation may well have peaked, but that further interest rate hikes will be necessary to bring it to target.
The UK economy also grew by more than expected in October, after three-month period of decline. Car sales and a strong performance in the construction sector were the main contributors. But consumer confidence remains low as recession fears loom.
In the US, stock markets too ended December down, culminating in the worst year for US markets since the global financial crisis.
Inflation continued its downward trend after peaking in June. But the Federal Reserve (Fed) renewed its commitment to hitting inflations targets through interest rate hikes. The latest hike was smaller than the previous seven though.
Internet technology was the biggest underperformer, with rising interest rates having a heavy impact. Tesla was a large contributor to a lag in the consumer discretionary sector. It hit a two-year low as reports emerged of a halt in production in its Chinese factories.
Asian markets experienced marginal losses to finish the year. More positive news from China was offset by outflows from other markets in the region. Concerns around the length of the Federal Reserve’s interest rate hiking cycle played a role in this.
China was buoyed by earlier-than-expected Covid reopening, as well as positive shifts in government policy. Growth is at the forefront for 2023, after China’s leadership met at the annual Central Economic Work Conference in Beijing.
Elsewhere, Taiwanese and Korean stocks were impacted by both the Fed’s renewed stance on interest rate hikes and weakness in the internet technology sector. Meanwhile, Indian markets ended in the red and Japanese and Australian faced a similar fate.
Emerging markets ended lower in December but despite this, still outperformed the developed world. The Federal Reserve’s (Fed) inflation stance and the impact of China’s reopening on growth and inflation both weighed.
Latin America lagged most, followed by Europe, Middle East and Africa (EMEA), while Asia led. In Asia, China was the biggest outperfomer thanks to early Covid-reopening. Indonesia and the Philippines lost ground amid the wider downturn.
In EMEA, Turkey and Poland led gains (the latter outperforming its CE3 counterparts Hungary and the Czech Republic). In Latin America, weakness in Peru and Mexico dragged on the region’s performance though Argentina and Colombia offset some losses.
Rounding off what has been a horrible year, fixed income markets ended December in the red. Global bonds fell into a bear market for the first time in 70 years. US treasuries, UK gilts and German bunds all lost significant value over the year.
The major central banks look set to maintain their stance on tightening monetary policy (raising interest rates) to bring inflation back down to target levels, which was behind performance in 2022. But the silver lining was that US consumer price inflation fell for the second consecutive period.
Corporate bonds also suffered in 2022, though less so than government securities. The Sterling and European corporate indexes lost significant ground, while the US corporate index registered smaller losses. High yield bonds also finished the year modestly lower.
Monthly Market Roundup cov. December 2022
In our monthly market roundup for December, we look at what was a disappointing end to the year for global stock markets and analyse which factors had the most impact.
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
Data as of 30 December 2022 unless stated otherwise.
Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice.
Past performance is not a guide to future returns.
This document is marketing material and is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell securities.