Hedge funds continued to perform well in December despite the global economic turmoil, with the Eurekahedge Hedge Fund Index only dipping 0.3% against a challenging market backdrop that saw the S&P 500 down 5.9%. Following the flat performance in December, global hedge funds held their 2022 losses to 3.8%. By comparison, the S&P 500 lost 19.4%, exemplifying the resilience that hedge funds displayed in navigating the market turmoil in 2022.
During December, other central banks followed the Federal Reserve’s lead and signaled their expectation of smaller rate hikes to bring inflation down to the Fed’s 2% target even as tighter monetary policy weighed on global growth. Meanwhile the euro had a slight uptick against the dollar as the natural gas market stabilized and continental economic sentiment improved as inflation fell to 9.2%. There are positive indications that long-term inflation fears may be overstated as a relatively mild winter and forecast for Q1 2023 – allied to the sharp decline in energy prices – mitigate the entrenched Ukraine conflict and international Russian sanctions.
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