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Season Of Rises - Will it Last for long ?

Updated: Nov 22, 2022

In the past one and half months, world equity markets have risen by 12% from the bottom with US 10 Bond price rising by 15% this month. These are much-needed relief to investors that have been victims of this year's volatility.

The reasons for such relief can be found in USA CPI and PPI coming in lower than the estimate. Another reason is central banks providing hints of small rate hikes from now if the data continues its current trajectory. And lastly, the geopolitical tussle has reduced in intensity as compared to a few months earlier.

There are some financial reasons as well for this relief such as the current quarter results were not as bad as feared. Another reason for providing buying liquidity is the large buyback programs and CTA( Algo) funds having a buying preference after many months.

But the most important factor is the seasonality, as per the historical data starting from 2007 the current quarter is the second best in terms of world equity returns with the Jan - March quarter being the best but with most of the crashes occurring in that quarter and higher volatility. From the perspective of the Dollar Index and Crude Oil the main pain points of this year, it is the worst quarter with negative returns.

Thus, multi-asset seasonality over years has been the single largest factor for asset prices. And this quarter till now had followed the same. But as the underlying issues are enormous for the next six months it very obvious to be treating these moves with a lot of caution.


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