Insights

1 Minute Market Rundown – 28th September 2022

IMF Latest to Take the UK to Task
Global Yields Soar
Crypto Lift Off Delayed – Again

If this job was easy, where would the fun be? Yesterday’s risk positive tone lasted about as long as the Truss feel good factor. Global interest rate expectations are growing at a frankly scary/ludicrous/dangerous (delete as appropriate) pace and it continues to shake markets. Markets are pricing in a 6.25% base rate for the UK by May next year, the US 10 year yield is above 4% and the ECB continues to ratchet up their rate hike narrative, albeit in their usual befuddled manner.

On top of this markets reacted to the coincidental leaks that have sprung up on the Nordstream pipeline. Put this all together and you have stock markets getting slammed again, a roaring USD and a crypto rally that got snuffed out again before it really got started.

Honestly, It is hard to commit to a view at these levels. I struggle to recommend adding to long USD positions at these levels as I believe valuations are getting stretched. Conversely I can’t really recommend fighting the moves just yet as we are approaching month end and flows should indicate more USD buying for portfolio rebalancing.

The IMF is the latest economic group to come out and condemn the UK’s new economic measures, calling for a reversal or they will create inequality and inflation. I am a little surprised the pound has not plunged further yet, and it feels like a when not if. The USD may not be the best vehicle to express this trade and against the CHF, EUR and YEN are our preferred choices.

I wrote at the end of August that September is seasonally the worst month of the year for stocks and so it has played out. So let’s take some positives and point out that October has been the most positive month for BTC since its inception. Yesterday’s reversal hurt, but I remain a buyer on dips on a medium term basis and with risk markets in general pricing in all the doom and gloom I remain cautiously optimistic that the next significant move is higher.

As always, good luck out there!

Richard Usher – Head of OTC Trading

Richard-Usher-1

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