If you asked private investors what triggered this year’s stock market meltdown, most would probably name the war in Ukraine.
The possibility of the conflict with Russia causing a global catastrophe has hammered sentiment, but it’s not the prime cause of the crash.
Others may point to rampant inflation, triggered by this year’s energy shock and post-Covid supply shortages. It’s not that either.
China’s ongoing pandemic lockdowns haven’t helped, but the number one threat hanging over markets is none of the above.
It’s the US Federal Reserve.
The Fed is the main reason why markets and investors are running scared and the recovery won’t come until chairman Jerome Powell changes his hawkish tune.
When he turns dovish, markets will fly again. Some reckon that day isn’t far away and investors should be ready for it.
There’s an old saying that bull markets don’t die of old age, but are killed by the Federal Reserve. That has certainly been the case this year.
The Fed could have saved markets from Russian President Vladimir Putin, just as it saved them from the global financial crisis in 2008-2009 and the pandemic in March 2020.
All it needed to do was give them yet another blast of cheap money in the shape of near-zero interest rates and yet more quantitative easing.
And it would almost certainly have done so, if it wasn’t for inflation.
____________
Watch: US Fed chief warns of 'pain' in reducing inflation
Instead of bailing out the US economy, as it has done for the past 25 years or so, the Fed is actively aiming to smash a hole in the bottom by engineering a recession to stop prices from raging out of control.
It has reversed decades of monetary loosening by increasing the Fed funds rate from 0.25 per cent to 3.25 per cent in eight months, and shifted from QE to QT. Quantitative tightening is now shrinking the Fed’s balance sheet by $85 billion a month.
This is draining the global economy of liquidity, causing that crash we see around us.
Fed tightening has caused “havoc” and sent investors running for cover, says David Morrison, senior market analyst at Trade Nation.
There are few safe havens as Mr Powell gets belatedly tough on inflation.
“The S&P 500 has fallen up to 27 per cent this year, while many bond investors are down 40 per cent. Even traditional inflation hedges, like gold, have failed to shine,” Mr Morrison says.
Markets anticipate more tightening to come, pricing in “a near 100 per cent probability of another 75 basis-point rate increase to the Fed funds rate at this week’s meeting, which would lift it to 4 per cent”.
Yet, there are growing hopes that Mr Powell may soon strike a more dovish note, Mr Morrison says.
“Just a month ago, analysts were anticipating another 75 basis-point hike in December, but they have now dialled down this forecast. Given that rate hikes act with a lag, it makes sense to slow things down to avoid a deep recession,” he adds.
The Fed’s meeting on Tuesday and Wednesday this week could be pivotal.
“If the Fed signals, either in its statement or in Mr Powell’s subsequent press conference, that it’s preparing to back away from an overly aggressive programme of monetary tightening, we could see a significant market turnaround as we approach year-end,” according to Mr Morrison.
Jeremy Batstone-Carr, European strategist at Raymond Williams, also sees grounds for optimism.
While “in the very near term, base rates are going higher for sure, a de-escalation in the tightening process may not be too far away”, he says.
Investors have priced in a host of challenges, including tensions over Taiwan, Covid restrictions in China, UK and European political and economic disarray, and the collapsing Japanese yen, but Mr Batstone-Carr says they have missed something.
“What has not been discounted is the likelihood that the eventual outcomes from the array of crises befalling the planet in 2022 may conclude constructively.”
He suspects a recession, expected late 2022-2023, may prove short and shallow, and successfully reduce inflationary pressures.
While in the very near term, base rates are going higher for sure, a de-escalation in the tightening process may not be too far away
Jeremy Batstone-Carr,
European strategist at Raymond Williams
“This, in turn, will likely cause the rate hiking process to peak, at which point markets will focus squarely on monetary policy easing. With the challenges of 2022 in the rear-view mirror, the happy issue for investors will likely be how best to position portfolios for a more constructive future.”
This year’s global equity weakness has “taken much of the froth out of absolute valuation metrics” and laid the groundwork for a more constructive 2023, Mr Batstone-Carr adds.
The money supply is shrinking fast, suggesting that the Fed is winning its inflation fight, according to Giles Coghlan, chief market analyst at HYCM.
“As such, ahead of a possible hiking rate cycle slowdown, investors might consider a more bullish approach to the stock markets,” Mr Coghlan says.
“If the risks that have been weighing on stocks, such as central bank action and rising energy costs, begin to subside, today’s cheap stock valuations will become increasingly attractive.”
Central banks outside the US are already easing, with the Reserve Bank of Australia and the Bank of Canada lifting rates by 0.25 per cent and 50 basis points, respectively, in October.
That was more dovish than markets expected and offers bulls grounds for optimism, says Joshua Mahony, senior market analyst at online trading platform IG.
____________
Watch: why is everything so expensive right now?
Do not get carried away, though.
“We haven’t hit peak rates yet and a stubbornly high level of inflation could quell this near-term optimism,” he says.
John Wyn-Evans, head of investment strategy at Investec Wealth & Investment, is also concerned that investors could jump too soon, encouraged by recent “dovish surprises” from Australia and Canada.
As ever, it will be the Fed that will define the next leg of the financial market cycle.
“There is increasing chatter that it will consider when and how to slow the pace of increases, but this is far from the pivot that traders crave.”
Mr Wyn-Evans believes the Fed will only ease once activity and inflation are much weaker than today.
“The effects of the policy tightening that has already taken place will take a while to feed through to data and corporate earnings, and so there could be a drawn-out battle between the prospect of a rate-cycle peak and earnings downgrades.”
Investec is preparing for the big shift, starting to close its position of being “underweight” on equities.
“But we need more visibility on both corporate profits and the timing of the rate cycle to contemplate being outright bullish,” Mr Wyn-Evans says.
There is another old investor saying — you can’t fight the Fed. Investors shouldn’t even try. But they should watch it closely.
The Fed can kill any market rally, as we saw in the summer. It will also fire the starting pistol on the next one.
Just not yet.
UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
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MATCH INFO
Rugby World Cup (all times UAE)
Final: England v South Africa, Saturday, 1pm
Global state-owned investor ranking by size
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United States
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China
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UAE
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Japan
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5
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Norway
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Canada
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Singapore
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Australia
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Saudi Arabia
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South Korea
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The lowdown
Badla
Rating: 2.5/5
Produced by: Red Chillies, Azure Entertainment
Director: Sujoy Ghosh
Cast: Amitabh Bachchan, Taapsee Pannu, Amrita Singh, Tony Luke
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Jewel of the Expo 2020
252 projectors installed on Al Wasl dome
13.6km of steel used in the structure that makes it equal in length to 16 Burj Khalifas
550 tonnes of moulded steel were raised last year to cap the dome
724,000 cubic metres is the space it encloses
Stands taller than the leaning tower of Pisa
Steel trellis dome is one of the largest single structures on site
The size of 16 tennis courts and weighs as much as 500 elephants
Al Wasl means connection in Arabic
World’s largest 360-degree projection surface
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Labour dispute
The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.
- Abdullah Ishnaneh, Partner, BSA Law
MATCH INFO
Uefa Champions League last-16, second leg:
Real Madrid 1 (Asensio 70'), Ajax 4 (Ziyech 7', Neres 18', Tadic 62', Schone 72')
Ajax win 5-3 on aggregate
Not Dark Yet
Shelby Lynne and Allison Moorer
Four stars
Milestones on the road to union
1970
October 26: Bahrain withdraws from a proposal to create a federation of nine with the seven Trucial States and Qatar.
December: Ahmed Al Suwaidi visits New York to discuss potential UN membership.
1971
March 1: Alex Douglas Hume, Conservative foreign secretary confirms that Britain will leave the Gulf and “strongly supports” the creation of a Union of Arab Emirates.
July 12: Historic meeting at which Sheikh Zayed and Sheikh Rashid make a binding agreement to create what will become the UAE.
July 18: It is announced that the UAE will be formed from six emirates, with a proposed constitution signed. RAK is not yet part of the agreement.
August 6: The fifth anniversary of Sheikh Zayed becoming Ruler of Abu Dhabi, with official celebrations deferred until later in the year.
August 15: Bahrain becomes independent.
September 3: Qatar becomes independent.
November 23-25: Meeting with Sheikh Zayed and Sheikh Rashid and senior British officials to fix December 2 as date of creation of the UAE.
November 29: At 5.30pm Iranian forces seize the Greater and Lesser Tunbs by force.
November 30: Despite a power sharing agreement, Tehran takes full control of Abu Musa.
November 31: UK officials visit all six participating Emirates to formally end the Trucial States treaties
December 2: 11am, Dubai. New Supreme Council formally elects Sheikh Zayed as President. Treaty of Friendship signed with the UK. 11.30am. Flag raising ceremony at Union House and Al Manhal Palace in Abu Dhabi witnessed by Sheikh Khalifa, then Crown Prince of Abu Dhabi.
December 6: Arab League formally admits the UAE. The first British Ambassador presents his credentials to Sheikh Zayed.
December 9: UAE joins the United Nations.
More from Neighbourhood Watch:
WWE TLC results
Asuka won the SmackDown Women's title in a TLC triple threat with Becky Lynch and Charlotte Flair
Dean Ambrose won the Intercontinental title against Seth Rollins
Daniel Bryan retained the WWE World Heavyweight Championship against AJ Styles
Ronda Rousey retained the Raw Women's Championship against Nia Jax
Rey Mysterio beat Randy Orton in a chairs match
Finn Balor defeated Drew McIntyre
Natalya beat Ruby Riott in a tables match
Braun Strowman beat Baron Corbin in a TLC match
Sheamus and Cesaro retained the SmackDown Tag Titles against The Usos and New Day
R-Truth and Carmella won the Mixed Match Challenge by beating Jinder Mahal and Alicia Fox
SNAPSHOT
While Huawei did launch the first smartphone with a 50MP image sensor in its P40 series in 2020, Oppo in 2014 introduced the Find 7, which was capable of taking 50MP images: this was done using a combination of a 13MP sensor and software that resulted in shots seemingly taken from a 50MP camera.
Fight card
1. Bantamweight: Victor Nunes (BRA) v Siyovush Gulmamadov (TJK)
2. Featherweight: Hussein Salim (IRQ) v Shakhriyor Juraev (UZB)
3. Catchweight 80kg: Rashed Dawood (UAE) v Khamza Yamadaev (RUS)
4. Lightweight: Ho Taek-oh (KOR) v Ronald Girones (CUB)
5. Lightweight: Arthur Zaynukov (RUS) v Damien Lapilus (FRA)
6. Bantamweight: Vinicius de Oliveira (BRA) v Furkatbek Yokubov (RUS)
7. Featherweight: Movlid Khaybulaev (RUS) v Zaka Fatullazade (AZE)
8. Flyweight: Shannon Ross (TUR) v Donovon Freelow (USA)
9. Lightweight: Mohammad Yahya (UAE) v Dan Collins (GBR)
10. Catchweight 73kg: Islam Mamedov (RUS) v Martun Mezhulmyan (ARM)
11. Bantamweight World title: Jaures Dea (CAM) v Xavier Alaoui (MAR)
12. Flyweight World title: Manon Fiorot (FRA) v Gabriela Campo (ARG)
Miss Granny
Director: Joyce Bernal
Starring: Sarah Geronimo, James Reid, Xian Lim, Nova Villa
3/5
(Tagalog with Eng/Ar subtitles)
The specs
Price, base: Dh228,000 / Dh232,000 (est)
Engine: 5.7-litre Hemi V8
Transmission: Eight-speed automatic
Power: 395hp @ 5,600rpm
Torque: 552Nm
Fuel economy, combined: 12.5L / 100km
The biog
Family: He is the youngest of five brothers, of whom two are dentists.
Celebrities he worked on: Fabio Canavaro, Lojain Omran, RedOne, Saber Al Rabai.
Where he works: Liberty Dental Clinic
Mohammed bin Zayed Majlis
Short-term let permits explained
Homeowners and tenants are allowed to list their properties for rental by registering through the Dubai Tourism website to obtain a permit.
Tenants also require a letter of no objection from their landlord before being allowed to list the property.
There is a cost of Dh1,590 before starting the process, with an additional licence fee of Dh300 per bedroom being rented in your home for the duration of the rental, which ranges from three months to a year.
Anyone hoping to list a property for rental must also provide a copy of their title deeds and Ejari, as well as their Emirates ID.
Our legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
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A Long Way Home by Peter Carey
Faber & Faber
Rankings
ATP: 1. Novak Djokovic (SRB) 10,955 pts; 2. Rafael Nadal (ESP) 8,320; 3. Alexander Zverev (GER) 6,475 ( 1); 5. Juan Martin Del Potro (ARG) 5,060 ( 1); 6. Kevin Anderson (RSA) 4,845 ( 1); 6. Roger Federer (SUI) 4,600 (-3); 7. Kei Nishikori (JPN) 4,110 ( 2); 8. Dominic Thiem (AUT) 3,960; 9. John Isner (USA) 3,155 ( 1); 10. Marin Cilic (CRO) 3,140 (-3)
WTA: 1. Naomi Osaka (JPN) 7,030 pts ( 3); 2. Petra Kvitova (CZE) 6,290 ( 4); 3. Simona Halep (ROM) 5,582 (-2); 4. Sloane Stephens (USA) 5,307 ( 1); 5. Karolina Pliskova (CZE) 5,100 ( 3); 6. Angelique Kerber (GER) 4,965 (-4); 7. Elina Svitolina (UKR) 4,940; 8. Kiki Bertens (NED) 4,430 ( 1); 9. Caroline Wozniacki (DEN) 3,566 (-6); 10. Aryna Sabalenka (BLR) 3,485 ( 1)
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Dubai World Cup Carnival card
6.30pm: UAE 1000 Guineas Trial Conditions (TB) US$100,000 (Dirt) 1,400m
7.05pm: Handicap (TB) $135,000 (Turf) 1,000m
7.40pm: Handicap (TB) $175,000 (D) 1,900m
8.15pm: Meydan Challenge Listed Handicap (TB) $175,000 (T) 1,400m
8.50pm: Dubai Stakes Group 3 (TB) $200,000 (D) 1,200m
9.25pm: Dubai Racing Club Classic Listed Handicap (TB) $175,000 (T) 2,410m
The National selections
6.30pm: Final Song
7.05pm: Pocket Dynamo
7.40pm: Dubai Icon
8.15pm: Dubai Legacy
8.50pm: Drafted
9.25pm: Lucius Tiberius
'Unrivaled: Why America Will Remain the World’s Sole Superpower'
Michael Beckley, Cornell Press
MATCH INFO
CAF Champions League semi-finals first-leg fixtures
Tuesday:
Primeiro Agosto (ANG) v Esperance (TUN) (8pm UAE)
Al Ahly (EGY) v Entente Setif (ALG) (11PM)
Second legs:
October 23
'Worse than a prison sentence'
Marie Byrne, a counsellor who volunteers at the UAE government's mental health crisis helpline, said the ordeal the crew had been through would take time to overcome.
“It was worse than a prison sentence, where at least someone can deal with a set amount of time incarcerated," she said.
“They were living in perpetual mystery as to how their futures would pan out, and what that would be.
“Because of coronavirus, the world is very different now to the one they left, that will also have an impact.
“It will not fully register until they are on dry land. Some have not seen their young children grow up while others will have to rebuild relationships.
“It will be a challenge mentally, and to find other work to support their families as they have been out of circulation for so long. Hopefully they will get the care they need when they get home.”
Know before you go
- Jebel Akhdar is a two-hour drive from Muscat airport or a six-hour drive from Dubai. It’s impossible to visit by car unless you have a 4x4. Phone ahead to the hotel to arrange a transfer.
- If you’re driving, make sure your insurance covers Oman.
- By air: Budget airlines Air Arabia, Flydubai and SalamAir offer direct routes to Muscat from the UAE.
- Tourists from the Emirates (UAE nationals not included) must apply for an Omani visa online before arrival at evisa.rop.gov.om. The process typically takes several days.
- Flash floods are probable due to the terrain and a lack of drainage. Always check the weather before venturing into any canyons or other remote areas and identify a plan of escape that includes high ground, shelter and parking where your car won’t be overtaken by sudden downpours.
Day 1, Dubai Test: At a glance
Moment of the day Sadeera Samarawickrama set pulses racing with his strokeplay on his introduction to Test cricket. It reached a feverish peak when he stepped down the wicket and launched Yasir Shah, who many regard as the world’s leading spinner, back over his head for six. No matter that he was out soon after: it felt as though the future had arrived.
Stat of the day - 5 The last time Sri Lanka played a Test in Dubai – they won here in 2013 – they had four players in their XI who were known as wicketkeepers. This time they have gone one better. Each of Dinesh Chandimal, Kaushal Silva, Samarawickrama, Kusal Mendis, and Niroshan Dickwella – the nominated gloveman here – can keep wicket.
The verdict Sri Lanka want to make history by becoming the first team to beat Pakistan in a full Test series in the UAE. They could not have made a better start, first by winning the toss, then by scoring freely on an easy-paced pitch. The fact Yasir Shah found some turn on Day 1, too, will have interested their own spin bowlers.
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
