December 2021

• Global markets ended 2021 on a relatively strong note despite continued concerns surrounding inflation, supply chain disruptions and the Omicron coronavirus variant.
• Major central banks signalled increasing readiness to tighten monetary policy during 2022 in response to persistent inflation pressures.
• Equity markets remained broadly resilient as investors focused on strong corporate earnings and economic recovery momentum.
• Technology and financial sectors outperformed across several developed markets.
• Emerging markets underperformed due to Chinese growth concerns and tightening global liquidity expectations.
• Commodity prices remained elevated despite increased volatility late in the year.

Asia (ex. Japan)

Asian markets outside Japan delivered mixed performance during December as investors balanced slowing Chinese growth and regulatory concerns against continued export resilience and improving regional trade conditions.

Chinese authorities signalled increased willingness to support economic growth through monetary easing and fiscal measures, helping stabilise sentiment late in the month. Semiconductor demand remained supportive for Taiwan and South Korea.

Europe

European equities advanced modestly during December as investors became more confident that the economic impact of the Omicron variant would be less severe than initially feared.

Financial and industrial sectors remained supported by improving growth expectations, while the European Central Bank maintained accommodative policies despite rising inflation across the eurozone.

United States

U.S. equities reached further record highs during December as strong corporate earnings, resilient consumer spending and easing concerns regarding Omicron supported investor confidence.

The Federal Reserve announced plans to accelerate the reduction of asset purchases and signalled multiple interest rate increases could occur during 2022 due to persistently elevated inflation.

United Kingdom

UK equities delivered positive performance during December as investors responded favourably to resilient economic activity and reduced fears surrounding the Omicron variant.

The Bank of England unexpectedly raised interest rates during the month, becoming one of the first major central banks to begin tightening monetary policy following the pandemic stimulus period.

Japan

Japanese equities advanced modestly during December as exporters benefited from strong global demand and relatively weak yen conditions.

Government stimulus measures and accommodative Bank of Japan policies continued supporting domestic financial conditions despite lingering pandemic-related disruptions.

Emerging Markets

Emerging markets remained relatively weak during December as investors anticipated tighter U.S. monetary policy and continued monitoring slowing Chinese growth conditions.

Commodity-exporting economies remained supported by elevated energy and metals prices, though broader capital flows weakened compared with earlier stages of the recovery.

Commodities

Commodity prices remained elevated during December despite increased volatility related to Omicron concerns and changing monetary policy expectations. Oil prices recovered from late-November declines as fears surrounding mobility restrictions eased.

Industrial metals stabilised amid expectations for Chinese policy support and continued infrastructure spending, while gold prices remained relatively stable as inflation concerns balanced rising interest rate expectations.