US central banks increased interest rate again and stocks suffered

North American equities sold off on Wednesday with S&P 500 having the worst performance since January 2021 as the US central banks increased the policy rate by another 0.75% to 4%. The US and Canadian equity markets advanced 8.3% and 6% in October but November started on the wrong foot. S&P 500 and Nasdaq lost 2.5% and 3.36% respectively and Canada’s S&P/TSX declined 1.23%.

 

The 0.75% increase in US interest rate was expected but the head of the Federal Reserve emphasized that there will be even more rate hikes coming, while many were expecting a more dovish tone and an even smaller increase in interest rate.

 

The US dollar which has crushed other currencies year to date with a 13.75% increase against the basket of other major currencies will continue strengthening at higher rates. Meanwhile, other central banks are trying to catch up with European Central Bank considering another 0.75% increase in rates.

 

The Canadian dollar which has stayed relatively strong vs the US dollar is losing ground as the Bank of Canada did not increase the interest rate with the same magnitude in their latest meeting. Elsewhere, the Japanese Yen and British Pound continue to be the worst performers among currencies, being down 22 and 13.5% year to date.