On the back of year-over-year headline consumer price index of 8.3%, the S&P500 corrected by 4.3 % while at the same time the TBs corrected (the 2-year TB yields at 3.74 % and the 10-year TB is at 3.41%), and the USD rallied versus the major currencies.
With inflation staying stubbornly high, the FED has little choice other than to keep hiking rates which in turn will impact negatively the economy, and which in turn, will result in the inflation to cool off.
Investment implications
The risk-on approach over the past weeks was a technical rebalancement, but by no means a reflection of better economic conditions. Macroeconomic and policy uncertainties remain elevated, and we would expect markets to remain volatile into the year-end.
We continue that there are pockets of good opportunities. We apply a defensive growth strategy with focus on knowledge intensive businesses such as biotechnology, luxury, semiconductors, and energy related opportunities. On the income side, we continue to promote our sharia compliant credit structure with focus on ME Governments.