Economic Insights for December 2022

 The following are some economic insights for the month of December.  As of now, the Federal Reserve have shifted their priorities in light of a slowing global economy.  They have moved from expediting rate hikes to setting the right peak rate target.  We could be looking at a hike of 50 basis points in December, followed by a projected two consecutive 25 basis points in Q1 2023. We are looking at a possible recession in the US economy, which will lead to a growth in unemployment.  This feeds the possibility of the Federal Reserve cutting the rates in the second half of2023. 

Fortunately, global supply chain bottlenecks have continued to ease in the last quarter.  This partly explains the weaker than expected US inflation for October.  Leading indicators such as the rise in housing prices and the consumer price index suggest that the momentum may turn.  On the other hand, the labour market indicators have remained steady.  This may delay disinflationary pressure for the early part of next year. 

The People’s Bank of China announced a 25 basis points cut to required reserve ratio, the reserve repurchase option rate.  They have also rolled out further measures to secure the financing for property developers to alleviate a feared cascading default.  That would weaken the CCP’s grip on power and fuel instability.   The ongoing monetary easing continues to remain ineffective in turning around the growth slowdown amid a subdued credit demand.  Even though China has signaled that they are easing lockdown measures, especially after recent unrest, I think we should remain sceptical until it actually happens. 

One of the largest drivers determining the range of portfolio outcomes is asset allocation decisions amid volatile markets.  Aggressive policy tightening has tempered the high inflationary environment, but now, we are on the precipice of global recession.  As such, it would be preferable to stay underweight  on equities, have greater liquidity, and gradually pivot towards allocating more to fixed income, with an extended investment horizon.  It would be better to prefer rated sovereign bonds over credit. 

In the meantime, I advise that investors remain underweight  on equities, since there is a tactical downside risk.  In fact, it is likely that further equity downside ahead will be driven by falling corporate earnings expectation, despite valuation stabilising because the Federal Reserve is raising rates. This is not necessarily a bad thing.  This is preferable to the shock of a major market correction. 

For equities, the choice is, of course,  Asia excluding Japan.  The US is slowing down alarmingly.  The EU is still wrestling with a negative rate environment, while funds are pouring into East and Southeast Asia. 

Credit spreads are  benign because of the fear of recession, and there is merit in that.  Lower quality credit, especially from the US, are most vulnerable to the weakening demand.  Borrowing costs are rising, and will continue to rise.  We have to consider the possibility that there will be some major defaults in some markets.  The short-end rates of the US Treasury curve continue to push higher.  Long-end rates, in contrast, have retreated to lower levels.  This has resulted in a more inverted yield curve.  This is an ideal environment to build a rated bond position.

AIA TMC & Tampines Changkat TMC, Elite Speaker Incubator, 26th November 2022

On the 26^th November 2022, AIA Toastmasters and Tampines Changkat Toastmasters held the Elite Speaker Incubator, at AIA Tampines.  The programme was run in behalf of Division G.  This programme was meant for Toastmasters who intend to go as far as possible in the International Speech contest.  This one session workshop was always meant to be intensive, and detailed.  It drilled down into what makes a great speech, and how to craft something memorable.  As such, we limited the intake for this programme to the first 24 people to sign up.  The lead trainer was Ng Kin Foong, two time finalist at the World Championship of Public Speaking.  The programme was focused on specific areas of a speech, followed by breakout sessions with group facilitators. 

Appointment Holders:

Organising Chair:

Terence Kenneth John Nunis, DTM 

Lead Trainer:

Ng Kin Foong, DTM 

Facilitators:

Eric Tan Shi Wei, DTM

Hyder Taufik, PM2

Terence Kenneth John Nunis, DTM 

Registration:

Gordon Liew Wan Kong, SR1 

Logistics:

Amos Yio Zhi Yan, PI1

Johnny Bao Trung Huynh 

Refreshments:

Zhuo Shu Zhen, DTM

Cindy Gan Chia Ee, DL5, PI2 

Photographer:

Rominia Leonard Sarte, PI2

Publicity:

Regine Sim Lee Ching, DL2