It has not been quite the bloodbath at the Pakistan Stock Exchange, after the central bank took most by surprise last week. The index lost a little over 1.3 percent in the three trading sessions that followed the monetary policy decision on Friday, which is nothing out of the ordinary. But the bears just taking their own sweet time to wake up, should not be confused with them not around.

Some buyside optimists have been quick to assert how the 100 basis points increase in the policy rate is already “priced-in”. The market movement leading up to the MPS clearly tells no pricing in was going on, as status quo was the word on the street.

The commodity price cycle may have eased, but high inflation is likely to stick around for some time. The inevitable adjustment of the currency and the administered energy price increase via higher taxes will continue to headline inflation in the coming months.

While there are little to no chances of the central bank going to the extent of maintaining a positive real interest rate, with yearly inflation projected to stay north of 20 percent – one cannot be certain if the interest rates have peaked yet.

The index has had a relationship with PIB yields like none other. Earnings, multiple, fiscal slippages, external financing concerns, political turmoil – all carry their respective weights, but nothing quite compares to how religiously the PSX indices have reacted to the interest rate movements. Almost without exceptions.

Even from the earnings perspective, upcoming few quarters promise more a repeat of FY19 – and that was not pretty. From cement to automobile, and from refineries to banks – most will struggle to keep pace. High frequency data already indicate the slowdown will hit profitability. With the technology sector being the only exception, all other index heavyweights do not inspire much confidence at the moment.

Add to the mix, the never-ending political saga. The events of the past two weeks may suggest a semblance of calm, but this may not last long. Uncertainty continues and should the PTI actually go ahead in implementing its call to dissolve assemblies – this would cause more uncertainty, than there already is. Nothing short of a 180-degree shift in turn of events is going to bring the bulls back. Oil prices alone may not do the trick this time.