Deutche Bank is out with a note today reminding us that at this time last year, the market was pricing in 74 basis points of Fed hikes in 2022. It turned out far differently as an inflation hike showed the Federal Reserve and other central banks were way behind the curve.
The sharp repricing led to a 'sell everything' mentality save for assets that were 'saved' by the Russia-Ukraine war. US dollar cash holdings beat nearly everything.
The new year is starting off in much the same way with the US dollar on top and stocks struggling but at least bonds are offering something of a safe haven.
This is turning out to be the mother of all hangovers after markets got drunk on cheap central bank money. The best hope for markets may be a sharper-than-expected improvement in inflation followed by a dovish shift.
