Updated: Jun 2
Global Market Review & Outlook
The buoyant markets of October continued through most of November, taking several equity indices to new all-time highs, until news of the new Covid variant, Omicron, at the end of the month reverberated globally and sent equity markets into their sharpest one-day falls of 2021, pushing all major markets into negative territory for the month.
The sudden risk aversion led to a tumble in bond yields, with 10-year US Treasury yields falling from the high for the month of 1.7% to 1.4% in a few days. With governments around the world immediately introducing travel and other restrictions, fears that a potentially more dangerous variant would damage growth in turn pushed down inflation expectations: the US 10-year breakeven inflation rate fell from 2.8% in mid-month, the highest since before the global financial crisis, to 2.5% by month end.
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MARKET COMMENTARY - DECEMBER 2021
The arrival of the Omicron variant at the end of last month prompted a sharp but relatively mild setback to risk appetite. Although travel restrictions and other precautionary measures raised fears of another slump in global growth, it is difficult to assess the potential impact of the new variant until more information is available on transmissibility and vaccine efficacy. However, with vaccination rates in many countries - particularly Asian manufacturing hubs - now higher than in the US, the global economy should be less vulnerable than it was a year ago.
THE GREAT MODERATION
2022 Global Market Outlook
Global economic growth will be slower but still above trend in 2022. This forecast should allow equities to outperform bonds. Inflation has yet to peak, but it will likely decline over the year and as a result any central bank tightening will be modest.