At the end of 2022, there were two consensuses on Wall Street: the US will have a soft/medium recession and the certainty that Europe will have a much harder recession. Fast forward one month and nothing is certain anymore.

In December, central bank hawkishness continued, despite some softening economic data. The significant tightening of monetary policy in 2022, along with other macroeconomic factors, such as the Russia-Ukraine war, has had a large impact on financial markets.

Prospects of cooling inflation in the US has led investors to anticipate the potential that the Fed will raise rates by 50bps at its December meeting.

Typically, decreasing interest rates is positive for equities, and the S&P 500 index finished above the 4,000 level for the first time in two months on November 22nd.

The last week of October gave mixed signals to investors, with US Q3 GDP increasing more than expected despite a number of headwinds; and also a mixed Q3 earnings season. Chances of a ‘hard landing’ are weighing on investor sentiment and exacerbating volatility.

Since the economic symposium in Jackson Hole last month, central bank hawkishness has continued. The selloff in bond markets has been significant this month, and the US Dollar has continued to strengthen.