At its monthly meeting, the Federal Reserve changed its message about the future path of interest rates. It suggested that there would be two rate rises during 2023.
The market interpreted this as a sign that it was not perhaps as relaxed about the outlook for inflation as previously indicated. Its minor change caused a stir in the market, with equities retreating. The bond market seemed more comfortable with the US Treasury 10 Year yield briefly spiking up before falling again. Emollient words from Federal Reserve Chairman Jerome Powell the following week reassured markets that the Federal Reserve continued to believe that the current jump in inflation would be transitory.
Falling bond yields gave growth and technology stocks a boost. The Nasdaq 100 was up 6.3 per cent, ending the month at an all-time high with the S&P 500 not far behind, gaining 2.2 per cent. UK and Euro-based investors would have seen these gains enhanced due to US dollar strength. The dollar appreciated 2.8 per cent against sterling and 3.1 per cent against the euro. European markets lacked lustre, with the Italian MIB down 0.4 per cent, the FTSE All-Share up 0.2 per cent, the DAX 0.7 per cent and the CAC 0.9 per cent.