The World Equities Index fell in December: -4.7% in local currencies and -7.3% in euro.
US equities underperformed. The S&P 500 fell by 5.8% and the Nasdaq 100 plunged by 9%. Expressed in euro, these losses were even steeper (resp. -9.3% and -12.4%). The worst sector within the S&P 500 was Consumer Discretionary (-11%), as it was dragged down by its main components Amazon.com (-13%) and Tesla (-37%). IT and Communication Services fell by about 8%. The best relative performers were utilities, energy, healthcare and consumer staples.
The Stoxx Europe 600 fell by 3.4%. Here as well, the IT sector underperformed, but its weight (about 7%) is much lower than in the US. The best performing industries were banks, insurance, real estate, healthcare and retail.
Growth stocks were therefore particularly weak in December. The World Equity Value Net EUR (-5.9%) outperformed the World Equities Growth Net EUR (-9.4%).
The Emerging Markets Index was down 2% in local currencies and 4.9% in euro. Chinese equities bucked the trend and posted a positive performance (China Equities Net Local: +4.8%) while the benchmarks for Taiwan, Korea and India lost about 5%.
The Federal Reserve (Fed) raised its Fed Funds Rate by 50bps to 4.25% - 4.50%. This decision was expected, after 4 consecutive hikes of 75 bps. However, the Fed made it clear that it is strongly committed to cutting inflation back to 2 percent. This makes the market-friendly scenario of the Fed loosening its monetary policy by mid-2023 less likely. The next day, the
European Central Bank raised its deposit rate by 50 bps to 2% and conveyed a similar message. The
Swiss National Bank raised its target rate by 50 bps to 1%.
December was no better for bonds. The Bloomberg Euro Aggregate Government Index fell by 4.4%, which was its second worst monthly performance since the index was launched in 1998. The Bloomberg Euro Aggregate Corporate Index was down 1.5%. The 10-year Bund yield surged from 1.93% to 2.57%. The average yield to maturity on Euro-denominated investment grade corporate bonds reached 4.25%. USD-denominated bonds and high yield bonds posted smaller losses.
The euro gained 2.9% against the dollar and 2.5% vs. the British pound and the Norwegian kroner. The Japanese yen was even stronger than the euro.
Gold was up 3.1% in USD (stable in EUR)
Crude oil remained stable around 80 USD/bbl. The price of European natural gas (Netherlands TTF Natural Gas Forward Month 1) plunged by 47% (74 EUR/Mwh) and fell back to the level of the beginning of the year.