European Comeback?

Investors worldwide are keeping a careful eye on the most important economic data points in search of clues as to how the world's central banks will behave in their efforts to bring inflation under control. In light of this, global markets got some solace from the fact that consumer and wholesale inflation readings from the previous week came in lower than predicted. This led to speculations that the central bank would have to back down from its aggressive interest rate rises.

So, whilst US markets experienced a modest pullback, most Western European markets were moving in the opposite direction and achieved positive results. Generally, these days, developed markets are highly correlated, so it’s interesting to see these markets moving in different directions.

Furthermore, investors are continuing to examine the trajectory of monetary policy as European markets finished higher on Friday. This comes after some stern remarks were made by officials from the United States Federal Reserve.

Uncovering the Latest Relevant Economic Indicators in the US

We know so far that the US has a significant impact on the development of the markets, hence it is essential to understand the latest macroeconomic factors that might shape the following weeks.

Last week, initial jobless claims were reported to have decreased to 222,000 by the Labour Department on Thursday. This is a decrease of 4,000 from the revised amount reported for the prior week, which ended on November 12. The total for the prior week has been adjusted up by 1,000, taking it from 225,000 to 226,000. The corrected average from the previous week was brought up to 219,000, representing a jump of 2,000 from that number's four-week moving average.

The number of people who filed for the week that ended on November 5 was 1,507,000, which represents an increase of 13,000 over the revised estimate for the previous week. The figures for the prior week, which were originally reported as 1,493,00, have been revised up to 1,494,000.?

Building Permits in October were at a seasonally adjusted annual rate of 1,526,000, according to a report that was jointly released by the United States Census Bureau and the United States Department of Housing and Urban Development. This is a 2.4% decrease from the revised figure of 1,564 thousand in September. October's Housing Starts came in at a pace that was seasonally adjusted to be 1,425,000 units per year. This is a 4.2% drop from the revised estimate of 1,488,000 for September.

Delve into the Markets with a Long-term Horizon

Since reaching its high point at the beginning of the year, the S&P 500 index, which is comprised of the 500 largest publicly traded companies, has seen a decline of 18%. The post-pandemic growth has been completely reversed due to a confluence of factors, including concerns about an economic downturn, inflation at a 40-year high, and increasing interest rates.?

To put it another way, investing is risky when one has a limited time horizon. If you intend to invest money that you will need within the next year or two, you risk incurring losses by placing it into the market. It is possible that the stock market could fall deeper into a recession and that interest rates will continue to rise. This will put further pressure on firms and consumers, making bonds seem more appealing. However, there is also the prospect that stock prices may surge during the course of the following year if inflation begins to moderate and the Federal Reserve slows the pace at which it raises interest rates.

Investing one's money during a bear market is a terrifying prospect. When stock prices are falling, it appears they can continue their decline, which is often the case. Investing during a down market, or investing in any need for that matter, comes with this inherent risk. However, as we witnessed in March 2020, a bear market does not rule out the possibility of profitable chances for investors at all.

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Luke Abbott