Stock Markets Already Forgetting the 2022 Decline

Stock markets went through a major decline in 2022, which started at the begging of the year as inflation accelerated further around the globe and central banks started the steepest rate hike path in history. As a result, stock markets remained bearish until October but they started reversing higher as central banks started to soften the rhetoric.

We saw some decent moves in October and November as the USD retreated lower, but in December USD buyers came back and there was some confusion regarding the path of central banks for the coming months as inflation starts to slow, while the global economy heads into a recession. Although the recent data suggests that the recession is likely to be soft.

German Stock Index Dax 40 – The Price Is Above MAs Again

Most of the losses from last year have already been erased in Dax

In January, the buying momentum has picked up again and yesterday we saw some decent gains in European stock markets again, while US markets were closed for Martin Luther King Day. Closing changes for the main European indices as the hot start to the year continues:

• Stoxx 600 +0.5%
• German DAX +0.4%
• France’s CAC +0.3%
• UK’s FTSE 100 +0.2%
• Spain’s Ibex flat
• Italy’s FTSE MIB +0.4%

This is an incredible start to the year for European stock markets. The FTSE 100 is threatening an all-time closing high from way back in 2018. The IMF is pressing central banks for further hikes, but stock price action in markets is showing that they will stop soon. That will push stock markets higher, so it seems like the major retreat from the first three quarters of 2022 is over and we will likely see new highs in the German DAX early this year.

IMF’s Georgieva Comments

• Inflation remains stubborn, central banks must continue to press
• Not expecting to downgrade October forecast for 2.7% global growth in 2023
• Inflation remains stubborn and central banks must continue to press for price stability
• The downside risk of spiking oil prices did not materialize, labor markets remain vibrant
• Expects global economy to ‘bottom out’ toward the end of 2023, early 2024, barring unexpected surprises
• Important for China to ‘stay the course’ in reversing an earlier zero-covid policy
• The biggest risk to 2023 outlook is possible spillover from Russia’s war in Ukraine, social unrest
• IMF’s projection for 4.4% growth in china depends on the transition away from zero-covid policy
• Any US Recession would be mild, expects China to become net contributor to global economy by mid-year
• Says the Bank of Japan is pursuing an appropriate review of monetary policy stance but should keep policy accommodative

ABOUT THE AUTHOR See More

Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.

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