Trader Insights

Markets That Matter – 2022 October/ November – Newsletter

Trusst me

  • Watch 20+ Trading Talk episodes
  • Run a newly built algorithm (or two) on a demo account to check on the performance
  • Complete half of a ‘12 week’ fitness programme
  • Start a new job and complete a full induction
  • Be a UK PM and then not be a UK PM
  • Cause the most volatile domestic financial markets seen in decades

Here are a few things you can complete in 45 days. Liz Truss opted for the last 2. 

Truss’ reign didn’t last very long… in fact, it was by far the shortest reign EVER by a UK PM. 

Market Brief 02112022 - 1

In fairness, Truss managed to do what no other PM has managed, oversee two monarchs – perhaps the only positive she will be remembered for. 

On the other hand, what an incredible mess she and ex-Chancellor Kwarteng made of their economic budgeting. Not only did they cause significant backlashes from the public, it left the GBP trading at levels not seen since 1985 and threats of parity against the Dollar, almost unthinkable a year ago. 

Pension funds were days away from crashing before the Bank of England stepped in and reignited ‘QE’ (bought long-end UK Government bonds), which helped restore some normality in the bond markets. 

This chart shows the initial move in bonds following the announcement of the largest tax cuts since 1972:

Market Brief 02112022 - 2

Basically, if you want to announce the largest tax cuts in 50 years, at a time of the highest inflation in 40 years, you best have the plan to pay for it. 

The political pantomime continued as Kwarteng then Truss stood down and for a moment there appeared to be the possibility that ‘BoJo’ would re-enter the picture. Thankfully, it didn’t come to that and former Chancellor Rishi Sunak became the 3rd PM in 2022. 

The hope is that he can provide some calm to markets that have had a tumultuous few months. 

For the Cable, technical resistance has been found at the 100 days Moving Average:

Market Brief 02112022 - 3

This area is to be watched moving forward.

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