MyStratWeekly – October 31st 2022

Topic of the week: The real estate market in turmoil from the sharp rise in mortgage rates

• Mortgage rates record increases not seen in decades, even historic in the Eurozone;
• This is the consequence of strong monetary tightening by central banks, which is set to continue;
• The real estate market is beginning to adjust significantly in some countries: Australia, Canada, Sweden and more recently in the United States and the United Kingdom;
• This sharp reversal increases the risk of recession.

Market review: Peak on rates ?

• ECB : +75 bp but a more dovish rate guidance;
• UK yields back to mid-September levels;
• Global rally in bonds and equities (ex-China);
• European energy crisis takes an unexpected turn.

Chart of the week

The amount of physical cash is falling in the euro area. Money in circulation has shrunk by €49bn since the peak in mid-July.
Physical cash hoarding, used by some banks, particularly in Germany, made it possible to avoid negative rates, at the cost of the safe.
The accumulation of banknotes and coins has therefore logically stopped since the return to positive interest rates on July 21.