This year has been a tumultuous one for global financial markets, to say the least. War, soaring inflation, rate hikes, recession, bear market – these terms have been flung about for much of this year, sending fear coursing through many investors and traders.
However, certain assets have flourished even amidst the doom and gloom, enjoying year-to-date gains as we head into the final month of the year.
Here are 3 of them:
US Dollar (DXY) = 10% year-to-date Gains
King Dollar asserted its grip across the FX world, being the preferred safe haven (an asset which investors hope will protect their wealth in times of great fear).
The ongoing Fed rate hikes have also contributed to the US dollar strength, much to the anguish of most of the FX world.
The DXY has pulled back significantly from recent heights, as markets grow to expect that the worse of the Fed rate hikes are now behind us.
As long as the Fed hikes again at its next FOMC meeting on December 14th and signals that more rate hikes are in store for 2023, while inflation and job hiring doesn’t fall off too drastically, the DXY should still be able to close out 2022 with an annual gain.
NOTE: The DXY, which is the benchmark US dollar index measuring the buck’s performance against six other major currencies.
Brent Oil = 16.3% year-to-date Gains
Since Russia invaded Ukraine, Western economies have ramped up sanctions against Russian exports of the precious commodity, leaving buyers around the world scrambling for oil, bidding up prices along the way.
Oil’s year-to-date advance has also swept up other oil-linked assets with it:
- Occidental Petroleum Group is the best performer on the S&P 500 so far this year: +145.3% year-to-date
- The Russian Ruble is the world’s best-performing currency so far this year: +24.15% year-to-date
However, markets now fear the prospects of a global recession in 2023, which would constrict demand for oil, especially as China continues to battle with Covid Zero lockdowns.
Such fears have seen Brent drop considerably from its year-to-date peak above $130.
Still, oil prices remain very much in a position to end the year with an annual advance.
Much would depend on whether global supplies are further tightened by another OPEC+ supply cut and the ramp up in the EU’s ban on Russian shipments, both set for early December.
Turkish Stocks = 87% year-to-date Gains (in US Dollar Terms)
The Borsa Istanbul 100 reached a new record high in 2022, while becoming the world’s best-performing stock market.
After all, double-digit gains are in stark contrast to the double-digit declines for global stocks, as measured by the MSCI ACWI Index which is down by 17.4% so far this year.
And this isn’t a one-off.
The Borsa Istanbul 100 Index has posted double-digit annual gains in 4 out of the past 5 years!
Why Have Turkish Stocks Soared?
Turkey’s central bank has been cutting its interest rates, at a time when central bankers around the world have been frantically hiking their own rates. And stocks generally love lower interest rates.
This asset class has also been a hedge against other economic turmoil:
- Turkey’s inflation hit 85.5% in October – its highest CPI print since 1998
- The Turkish Lira is the 8th-worst performing currency in the world against the US dollar so far in 2022
Hence, Turkish stocks have been seen as a hedge (a way to offset risks) against such woes.
And there’s a fundamental reason for these double-digit gains as well.
Turkish companies are still raking in the dough, where profits have risen by 234% in the first 9 months of the year.
And there’s your “Turkey” connection this Thanksgiving.
In the spirit of being grateful, we truly appreciate you reading our Daily Market Analysis.
And may you find gratitude in all of life’s blessings.