At the end of November, the financial markets underwent a sudden turnaround, due to the return of the pandemic with the discovery and spread of the new Omicron variant. Not only the threat of inflation and its consequences on the tightening of monetary policies in the world, but also the return of the specter of new closures and blockades due to the re-emergence of contagions have cooled the expectations of financial operators. At the same time, the theme of inflation is becoming increasingly important at a global level, not only in the bond area. From inflation expectations, both those discounted by inflation-indexed bonds and those based on surveys, it is clear that market participants are preparing for rising inflation rates, even over a multi-year horizon.

The discovery of a new variant of the Covid-19 virus has generated a new phase of uncertainty: the composed reaction of interest rates, thanks also to the control of central banks, has not been followed by an equally composed reaction of the stock market, with rather marked profit-taking on all the main global listings and on European listings, which have fully exploited the growing uncertainty linked to contagions.

The month of November closed negatively for equity markets, with wide geographical divergences. The United States was once again the best market, with the S&P500 index losing 1%, ending the month at its lowest level after having set new all-time highs. Same trend for Nasdaq, which recorded a loss of 0.40% on the month. Worse did Europe with EuroStoxx 50 index that recorded a -5% and Asia with Nikkei that lost 6% and Hang Seng – 6.70%. The Swiss SMI index fared better, containing losses to -0.46%.

The reference scenario remains negative in the short term, with the factors outlined above expected to dampen investors’ enthusiasm.