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Federal Reserve to speed up its exit

Federal Reserve to speed up its exit

Federal Reserve to speed up its exit

The Federal Reserve announced on Wednesday that it would speed up its exit from the policy that it had adopted early in the pandemic. Asset purchases will now decrease by $30 billion per month and possibly come to an end in March. This is a bit of a surprise shift in momentum from the Federal Reserve, which just on November 3 had suggested it would gradually taper asset purchases from the $120 billion monthly pace.

Even though the Federal Reserve has sounded a bit more hawkish over the last couple of months, investors were somewhat lackadaisical in their assessment of how aggressive the Federal Reserve would have to become. As a result, stock markets in the United States have rolled over quite drastically, but at the end of the day are still very much in an uptrend. Interestingly enough, the bond market does not seem as convinced and has actually been buying paper and what they may see as the Federal Reserve being “painted into a corner.” We have already seen multiple times at just the slightest interest rate hike causes major ramifications.

Without a doubt, the biggest story of 2022 is going to be the tapering coming out of the Federal Reserve, and their potential subsequent reversal as time marches on.

Chinese defaults continue

Chinese defaults continue

Yet another Chinese real estate crisis has popped up, as Shimao Group Holdings has made headlines just a week after rating agencies declared default to other Chinese giants in the form of China Evergrande Group and Kaisa Group Holdings. Bond markets of course have been reeling as a result in the corporate sector on the mainland, as the dominoes continue to fall.

The real concern of course is any sense of contagion, which so far has been abated. However, this is one of the stories that will not go away, and the fact that yet another giant has entered the fray of defaulting, certainly will do nothing to assuage investor’s fears of putting money to work on the mainland. At this point, a lot of distressed assets will be for sale, but the trick of course is to pick the survivors.

US still undecided on restrictions involving China’s SMIC

US still undecided on restrictions involving China’s SMIC

The United States is still deciding whether or not to block more sales of US technology to Chinese chipmaker SMIC but has raised the possibility of discussing further restrictions with other countries around the world on selling chipmaking equipment to China, due to fears of military use.

The initial blacklisting of the corporation happened during the Trump administration but is being followed by the Biden administration as it seems this is a nonpartisan issue. While fears of militarization from this corporation continue to be an issue, most analysts believe that the corporation will simply buy from other less hostile nations to continue its production. This comes at a time of extreme chip shortages, which makes it particularly sensitive topic for global investors.

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