Caution into the weekend

Investors are opting for caution at the end of another strong rebound week, with equity markets a little lower as we near the close.

The rebound we’ve seen over the last couple of weeks has been nothing short of extraordinary. So much so that I don’t think it’s unfair to suggest we’re seeing an unhealthy amount of complacency creeping into the markets.

I’m not sure what exactly is more appealing about equity markets right now. The aggressive tightening cycles of multiple central banks around the world? Sky-high inflation? Soaring commodity prices? Or is it slight relief at negotiations while Putin continues to commit atrocities in Ukraine without any regard for life or the slightest concern about the consequences of his actions?

I understand that markets probably fell too far against the backdrop of immense uncertainty and no light at the end of the tunnel but when it comes to Putin and negotiations, I can’t help but think we should take apparent progress with a pinch of salt. Instead, investors appear to be taking everything at face value which brings me back to the complacency warning above.

This year promises to be incredibly challenging for households and businesses and without the central bank backstop propping up markets, there’s a risk that equity markets won’t just rally relentlessly and be back in record territory before you know it, as before. Old habits die hard and “buy the dip” has been the mantra of the last decade. Time will tell whether it will be so rewarding going forward.

Bitcoin continues to consolidate

Bitcoin is slightly lower again for a second session but it’s holding above USD 40,000 for now. It rallied strongly on Wednesday but failed to break above SUD 42,000 and it’s been slipping since. Ultimately, the consolidation continues in these uncertain markets. It remains broadly aligned with risk appetite but the connection is certainly looser than it was earlier this year.

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/

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