Special Update – December Mid Month Update

Richard Wallis

Head of Research and Investment


The first half of December was dominated by newsflow regarding inflation and interest rates. The UK and US saw an easing in the pace of inflation, with data suggesting the peak US prices may have passed. There were 0.5% increases in interest rates in the UK, US and Eurozone. Following the large gains at the end of November, global markets struggled to make progress throughout much of the period, as doubts persisted over how soon the US Federal Reserve might ease monetary policy, with most indices finishing lower. Investor sentiment was also hit by growing fears over a global recession.

Economic Update

The Bank of England (BoE) raised its interest rate by 0.5% to 3.5%, the highest level since 2008, whilst indicating that more increases were likely. It was not a unanimous vote with six of the nine Monetary Policy Committee (MPC) members voting for the 0.5% rise, but one policymaker opted for a larger 0.75% hike whilst two voted not to increase rates at all. The BoE said “The labour market remains tight and there has been evidence of inflationary pressures in domestic prices and wages that could indicate greater persistence and thus justifies a further forceful monetary policy response”.

The Office for National Statistics (ONS) said Britain’s economy rebounded in October from its fall in September, where activity was affected by the public holiday for the funeral of Queen Elizabeth II. The ONS said the economy expanded by 0.5% in October, which was better than the expected 0.4% growth and well above the 0.6% contraction in September. Responding to this data, the Chancellor Jeremy Hunt said there was a “tough road” ahead.

The annual rate of UK inflation, as measured by the Consumer Price Index (CPI), fell by more than expected in November. The ONS said CPI rose 10.7% in November, lower than both the 41-year high of 11.1% in October and the forecasted smaller fall to 10.9%. The fall in the pace of inflation was broadly due to petrol and diesel prices easing from their record highs, although the ONS said average fuel prices remained well above what they were last year. Food prices continued to rise, with annual food inflation reaching 16.5%, the highest rate for 45 years and just above October’s increase of 16.4%. There was also a large upward contribution from housing and household services, principally from electricity, gas and other fuels.

British unemployment rose for a second consecutive month, increasing from 3.6% to 3.7% in the three months to October. Job vacancies in the three months to November fell by 65,000 to 1,187,000, but despite five consecutive quarterly falls remains at historically high levels. The ONS said growth in both regular pay excluding bonuses and total pay including bonuses rose by 6.1% in the three months to October, but after allowing for inflation they both fell by 2.7%. For regular pay, this was the strongest growth rate seen outside of the pandemic period and was driven by the private sector.

The US Federal Reserve (Fed) increased its interest rate by 0.5% to a new range of 4.25% to 4.5%, the highest since late 2007. This represented an easing in the pace of increases from the 0.75% rises at the previous four meetings. However, the Fed projected at least an additional 0.75% of further increases by the end of 2023, as well as a rise in unemployment and a near stalling of economic growth. The European Central Bank (ECB) also raised its interest rate by 0.5% to 2%. This represented an easing in the ECB’s pace of increases, but the central bank stressed significant tightening remained ahead.

US consumer prices rose by less than expected for a second consecutive month in November, amid falls in the costs of gasoline and healthcare as well as used cars and trucks. The Labor Department said the Consumer Price Index (CPI) rose by 7.1% in the twelve months through November, the smallest gain since December 2021. The so-called core CPI, which excludes volatile food and energy components, rose 6% over the same period, a slower pace than the 6.3% gain in October.

Market Update

UK indices finished the period 1 to 15 December lower, with the FTSE 100 underperforming the FTSE 250. The oil & gas sector suffered a sharp loss during the period, which weighed in particular on the FTSE 100, although both indices suffered from the likelihood of further global interest rate rises.

Within overseas markets, US indices were among the weakest performers with sentiment hit by expectations that interest rates would remain higher for longer and the increasing risk of a global recession. These factors also weighed on European indices as they also finished lower, including their worst daily performance in six months at the end of the period after the ECB raised its interest rate and said further hikes were to come.

Broad Asian and Global Emerging Markets indices produced mixed performances. The MSCI Asia ex Japan Index finished higher, boosted by the performance of China and Hong Kong, following the announcement of an easing in China’s strict zero-Covid policies. However, the MSCI Emerging Market Index suffered a loss as it suffered from falls in other regional markets, with Brazil in particular enduring a sharp fall.

Fixed income markets were mixed, with government bonds falling as global central banks announced further interest rate rises. However, sterling corporate bonds were more resilient as they finished with a nominal gain.


We generally recommend that you hold investments for the medium to long-term, which we would view as being for five years or more. This market commentary provides an insight into the current factors that are affecting short-term global returns, but should not be viewed as a basis for making long-term investment decisions. You should consider your own investment goals and timeframes before making any such investment decisions. If you do have any concerns about where your money is invested, please contact your Origen adviser.

CA8749 Exp:12/2023

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