2023-12-15 Markets

When it comes to communicating with the markets and managing expectations, the Federal Reserve Board under Jerome Powell has been one of the most effective official organisations I have seen in my career. I recall the almost insane writing style of Greenspan’s and how many hours we all spent counting word-changes, commas, accents and the number of rows dedicated to a single subject; it was worse than having a session with a fortune teller. Powell’s Fed clearly told us in 2021 that they would be purposefully late in raising rates (in order not to react hastily to a very anomalous situation), then they held our hand in the subsequent months and now they are saying that they are pretty much finished with their task (barring unexpected data). Because of this clarity of word, markets have been expecting the latter turn for quite some time now; you have to wonder then: why did everyone get so excited last week?

The news on the war in Ukraine and Gaza makes little or no reference to the coincidence of the sequence of events: a shakeup in the Middle East just as the front in Ukraine is stalling and Western allies commitment is weakening. Politically any war is not usually a great sell to the population at large, especially for those who have to actually fight it and not simply direct it. Sensing this, Iran and Russia managed to coordinate explosions of violence with disheartening skill and acute observation of the political environment in the US and Europe. Let us hope something changes.

[Sources: The Wall Street Journal]