December 22nd 2022, 10:59:52 pm

(about 5 months ago)

The equities’ sell-off continues

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After some gains early this week led by decent corporate earnings reports like Nike, North America stocks declined on Thursday to continue the year’s selloff. S&P 500 and Nasdaq declined 1.88% and 3.09% and Canada’s S&P/TSX lost 1.28% in the past five days.

Markets are trying to stay optimistic about the economic picture of 2023, but the continued hawkish central banks are observing inflation reports which are still hot, reaffirming their stands.

Canada’s November inflation report recorded a 7.7% annual increase vs. the 7.6% expected. The main contributors were food prices, rising mortgage costs, and higher rent. The inflation figures are declining in different countries but are still sticky and higher than the target rates most central banks are after.

Meanwhile, record-high mortgage rates are driving home sales lower. The sale of existing homes in the US fell 7.7% in November, and home prices declined for the 9th straight month. Still, house prices in the US are on average 37% higher than pre-pandemic levels.

All the factors are going hand in hand to push the economies into recession in 2023. The US economy has a 70% chance of recession in 2023. It remains to be seen whether economies can weather the storm with a soft recession.