The Cambridge Weekly –6th November 2023

Dovishness proves contagious

Just how much change a week can bring to markets was amply visible during the last seven days. Last week we wrote about how negative sentiment in stock markets can turn into a self-perpetuating destructive force for an entire economy as the investing public feels the heat of being poorer (at least on paper). This week, we look back at pretty much a reversal of last week’s perspective after stock markets staged an impressive bounce back. Last week’s rally was still dismissed as an entirely predictable trading-based short-term reversal from oversold levels. However, by the end of the week the bounce has proved far more substantial and persistent than anyone had dared to suggest would be possible or probable last week

October 2023 asset returns review

There is no sugar-coating it; October was not a good month for investors. Headline indices sank across every major region and asset class, as global financial and economic conditions finally took in the central bankers’ ‘higher for longer’ mantra and started pricing in what that might mean for asset valuations over the foreseeable future. Economic indicators showed weakness across the developed world, but this was not the ‘good’ kind of bad news that, in the past would have made markets predict more dovish central banker pronouncements.

Emerging markets: does growth always mean returns?

Why would you invest in Emerging Markets (EM)? In a word, growth. As the name suggests, developing economies generally have high potential to develop, and foreign investors are keen to get in on the action. It does not always work out, of course, but that is just part of the game: high risk comes with high reward. We have written a lot about emerging markets in recent months, from the obvious China – whose ‘emerging’ status perhaps stretches the definition somewhat – to India, Brazil and Argentina. The risk-reward profile of EM investment means that for every India or Brazil success story, there are plenty of Argentina-style cautionary tales.

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