ANALYSIS: Party-poopers point to the risk of a Fed pivot turning out to be more of a plateau before more rate increases.
Inflation is finally cooling. But the ghost of sky-high inflation continues to haunt fund managers.
In January, data from the eurozone suggested the US inflation figures were not a blip, when its December rate also dropped back into single figures. US figures for December are due out this week.So why are investors not dancing in the streets? Instead, party-poopers, perhaps humbled by a cruel 2022 marked by the killer combo of both sliding stocks and bonds, express nagging doubts when you ask how this year will pan out.
It has already chopped the size of its rate rises down to a half point, a break from the three-quarter point increments that we saw several times over last year. Early this year it is likely to want to sit back and see how that rapid pace of tightening filters through the economy.
But central bankers want to get back to a different sort of good old days when inflation was housebroken. If they remain single-minded in this mission and fire up the rate rises all over again, then some of the nastier features of portfolios in 2022 could reassert themselves this year.
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