Stock markets ended in red on Wednesday as the seesaw price action continues in the face of significant Omicron uncertainty.
Yesterday's fall doesn't feel particularly warranted given what little we know about Omicron at this point, and what Jerome Powell said recently. A hawkish central bank and concerned governments worldwide is hardly the recipe for a new surge in the stock market.
But then, buying dips has often appeared to defy logic and yet been very effective, so you can't blame investors for giving it a try. And let's face it, we're a good headline on vaccine effectiveness away from a potentially tasty Santa rally. Maybe that's the play for those jumping back in despite the worrying signs around the new variant.
Whether these rallies will have the legs over the next week or two maybe doesn't matter in that sense. And I'd be surprised if they do until we get more information.
It's perhaps more surprising that Powell's comments haven't had a bigger impact. For the Chairman to wait so long to tell investors what they already know and choose to do so at a time of real uncertainty when many still expect the central bank to be the backstop is both bizarre and a big deal.
Powell could be trying to lay the groundwork for a faster tightening of the policy if Omicron turns out not to be too bad, or even if it doesn't.
CBRT Intervenes as Erdogan Vows There's No Going Back
It's been another wild session for the lira after the Central Bank of the Republic of Turkey (CBRT) intervened in the markets and President Erdogan doubled down on his assault on interest rates, stating there's no going back from the current economic model. The lira continued to fall on these comments before the intervention, which only gave the currency a temporary lift.
The CBRT won't fight the market forever in its pursuit of rate cuts without consequences. The only thing they're bringing to the market is more volatility and two-way price action, but if they continue on their path, stability will elude them, and the whole experiment will come at a great cost.
Bitcoin Benefits From Improved Risk Appetite
Bitcoin is enjoying some reprieve in today's risk recovery but, just like other assets in the same bracket, remains vulnerable to the continual shifts in sentiment as information slowly appears. We seem to be jumping from good to bad news and back again daily. Although at this stage and after such a pullback in risk assets, no news may also bring some temporary relief.