September 2022 - Market Scoop
Market Scoop Welcome to the September instalment of our much-anticipated market commentary. Financial markets and by definition asset prices around the world continue to experience headwinds due to rising rates, falling bond prices, nuclear threats, significant rise in energy costs and floundering growth. Many now believe the US will enter a recession in 2023 – causing a domino effect. As the US dollar rises, it increases inflationary pressure in other countries, forcing them to consider more rate hikes. The on-going sell-off in bonds, despite growing concerns on recession, also points to liquidity issues. Importantly, markets remain at a “sliding doors” moment between two potentially very different outcomes shown here:
As recession fears intensify, we expect to see oil and energy prices continue their downward path - which should help moderate inflation. Fortunately, financial markets are “forward looking” meaning that much of the negativity is already priced into asset values.
On a positive note, barring any material shocks, our preferred path is that we see an improvement in underlying equity values as we head into Christmas. Overall, it feels like we are entering a new phase which will present opportunities, however, entering the market should be treated with care.
Jargon Buster - Recession:
In economics, a recession is a business cycle contraction when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various events, such as a financial crisis, an external trade shock, an adverse supply shock, the bursting of an economic bubble, or a large-scale anthropogenic or natural disaster. A recession is less severe and prolonged than a depression.
Synergy Private Wealth