Wall Street has closed with falls (Dow Jones:-0.90%; S&P500: -0.53%; Nasdaq:-0.38%) this Monday, after the mixed closing last Friday at the beginning of a historically bullish month of December for US equities. According to data from XTB, the S&P 500 has risen 73.2% of the time in December since 1928, the highest rate of gains of any month. During this period, the index has registered an average increase of 1.28%, making it the third best month of the year for this index. However, the month has not started on the right foot. The indices in Asia have closed with sharp falls and have dragged Europe and the US after the announcement by the governor of the Bank of Japan (BoJ), Kazuo Uedathat the organism could raise rates soon. This, analysts explain, has damaged investor confidence in risk assets.
WILL THE BOJ RATE RAISE?
Ueda indicated that «any increase would simply be an adjustment in the degree of monetary easing.» According to Ipek Ozkardeskaya, senior analyst at Swissquote Bank, these words suggest that the BoJ «remains far behind and normalization is becoming increasingly urgent», especially as new Prime Minister Sanae Takaichi’s fiscal measures «could drive Japanese inflation even higher.»
After this, the 10-year Japanese bond yield reaches a new high near 1.87%, a very high level in relation to the 1.71% «which is usually considered the point at which Japan’s era of ‘free liquidity’ effectively ends,» says Ozkardeskaya. This expert also highlights that there are around 3.4 trillion dollars circulate in global markets from Japanese investors seeking higher returns abroad, capital that could be repatriated as domestic returns rise. For XTB, the goldhighly correlated with Japanese bond yields, could be the asset to take refuge in this week. «From an economist’s perspective, raising interest rates and countering Takaichi’s fiscal push is exactly what the BoJ should do. That’s what central banks exist for: to offset politically motivated fiscal impulses that seek growth at all costs. But if the BoJ raises rates, Japanese yields will rise and Japanese capital could leave a significant hole in the global financial system just when everyone is wondering if we haven’t taken the artificial intelligence (AI)-driven rally too far,» says Ozkardeskaya. This, this analyst adds, explains why 10-year US bond yields are on the rise. For that and for the growing American debt, something that «should theoretically lead the Federal Reserve (Fed) to think similarly to its Japanese counterparts.»
AND THE FED?
That is the big question that the market is asking: what will the Fed do? The central bank holds its last meeting of the year on December 9 and 10 and the market practically assumes that it will lower interest rates by 25 basis points. In recent weeks, the probability of whether or not he would cut official rates has been – along with the fear of an AI bubble— the main engine of the markets. Now, data from CME’s FedWatch tool gives close to a 90% probability that the Fed will lower the price of money in December, while just two weeks ago the probability of this scenario occurring barely exceeded 30%. However, analysts believe that It is not as important that you lower rates as it is to know why you lower them.. This is the opinion of Stephen Innes, managing partner of SPI Asset Management, who assumes that there will be a cut in December and that there will continue to be in 2026, but warns about what he calls ««emergency cuts» in the face of any real deterioration of the world’s leading economy, especially on the side of the already weakened US labor market. If that were the case, the Fed could imply that «something is breaking». It is rare for these scenarios to be bullish for equities, warns Innes. On the other hand, the president of the United States, Donald Trump, has confirmed to the press that he has already decided who will be the new president of the central bank and who will announce it «soon». The Republican did not deny that he was going to appoint Kevin Hassett, the White House’s main economic advisor, when asked directly about it. Jerome Powell, current Fed chair and a frequent recipient of Trump’s criticism and anger, ends his term in May 2026.
2006 IN MEMORY
According to XTB analysts, the current scenario of central banks with flexible monetary policies and large investments financed with debt They remember the 2005-2006 cycle.
At that time, the global CPI was around 3% and central banks were gradually raising rates from 4% to 5% on average worldwide. Today, they explain, global inflation is around 3% and central bank interest rates are also around 5%. In that period, emerging markets, value-oriented equity markets and commodities performed excellently. «Of course, the current situation seems more sustainable because the money printer is now fueled by government deficits, not by private sector debt, as happened in 2005-2007,» these experts point out. In this sense, Schroders experts recommend look at company fundamentals and don’t focus too much on the current market climate to win in the stock market in the long term.
MACRO AND OTHER MARKETS
On the macroeconomic agenda, today the ISM and S&P PMI for November in the manufacturing sector. Wednesday will be the turn of the data use of ADPwhich have gained importance due to the delay in official figures, and on Friday the September PCE consumption deflatorone of the references most followed by the Fed. In other markets, the euro has appreciated 0.12% ($1.1609). He oil has risen 1.5%: Brent has settled at 63.36 dollars and the WTIat 59.56. He gold has risen moderately, up to $4,275 (+0.48%), and the silver It has added 2.85%, up to $58.76. He 10-year US bond yield has rebounded to 4.096%. He bitcoin It has plunged 6.49% and has fallen below $86,000.
