Counting down to 2023

If you’ve been to Orchard Road recently, it's not difficult to tell from the festive mood that Christmas is round the corner. 

The one event that many investors were looking out for before winding down for the year was the last Federal Reserve meeting earlier this week.

While the 0.50% rate hike was widely expected, the Fed’s projections that interest rates could reach higher levels compared to its previous forecasts were not well received by the market.

With the Fed rate hike, some investors here in Singapore are expecting that we might see higher yields for the upcoming 6-month T-bill auction on 21 December. 

However, we share why that might not be the case with the fall in government bond yields.

As we countdown to 2023, we will also share some tips to help you manage your finances better. We start with 3 ways that you can lower your tax bill. 

Wishing you happy holidays!

🧯Don't Fight the Fed

What happened? 

The US Federal Reserve raised its benchmark interest rate by 0.5% as expected, and officials projected that interest rates will rise more than previously expected next year.

What does this mean?

Powell made it clear that rate cuts are not on the cards as yet. In fact, the Fed’s projections would suggest that there are more rate hikes next year. 

The median estimate for the fed funds rates by the end of 2023 rose to 5.1% from 4.6% when projections were last published in September. 

Other Central Banks followed suit in raising rates. The Bank of England and the European Central Bank also raised interest rates by 0.5%. 

Why should I care? 

There’s still a lot of uncertainty in the projections. It’s no wonder that Powell said that “I can’t tell you confidently that we won’t move up our estimate…again.”

However, it seems like most investors do not believe in the Fed’s projections for more interest rate increases. The majority of forecasters are expecting the fed fund rate to be at 3.75% to 4.25% by end 2023, significantly below the Fed's median forecast.

With the current high interest rate levels, there are opportunities for investors to park their spare cash in high-yielding instruments without taking on too much risk.

🚗 MOVING THIS WEEK

• Microsoft (MSFT) has made an agreement to purchase a 4% stake in the London Stock Exchange Group for $2.8 billion as part of a cloud computing deal. This move represents a further expansion of big tech into the financial markets.
• Tesla (TSLA) is down 55% year to date after an SEC filing showed that Elon Musk sold another $3.6 billion in shares. 
• Chinese firms listed in the US, including Alibaba, face lower de-listing threat after the US accounting watchdog said it has full access to audit records 

• Grab is rolling out cost cutting measures, including a freeze on most hiring, salary freezes for senior managers, and cuts in travel and expense budgets to cope with an uncertain economy. 

• Hospitality REITs, including CapitaLand Ascott REIT and Far East Hospitality Trust, rose after average hotel room rates in Singapore reached a 14-year high in Septemebr 2022. 

Source: Bloomberg, CNBC, Business Times, Edge Singapore

💡 THE BIG IMPORTANT STORY

Fed raises rates, but T-bill yield could still fall from 4.4% 

The Fed raised its benchmark rate by another 0.50%. However, this may not translate into higher yield for the Singapore 6-month T-bill.

🤓 WHAT WE’RE LOOKING OUT FOR THIS WEEK

• Wednesday, 21 Dec: Singapore 6-month T-bill auction 
• Thursday, 22 Dec: US GDP
• Friday, 23 Dec: Singapore CPI

Source: SGX, Bloomberg, Refinitiv

🍭 THAT’S INTERESTING

It's a gold rush

The cost for an expatriate to join Sentosa Golf Club has more than doubled since the end of 2019 to reach S$840,000, according to brokerage Singolf Services. For citizens and permanent residents, the membership price has surged to as high as S$500,000. The increase is believed to be driven by an increase in ultra-rich Chinese who have relocated to Singapore seeking stability.  

Source: Bloomberg