For Week Ending August 26, 2022
It’s all anyone can talk about. So let’s continue to address it head on. As you’ll find in the commentary below, things are improving. But that doesn’t mean that Federal Reserve Chairman, Jerome Powell, will throw us a bone here.
Powell, right along, has done a great job of managing expectation. I personally have been critical of him. And even though I highly dislike the results of Powell’s speech at last week’s Federal Reserve Annual Policy Summit – the market selling off massively on Friday – I do agree with his stance and the way he’s managing investors and economist’s expectations. Now more than ever.
The trend for PCE and CPI is down – which is good. Sure, it’s not tremendous, but it’s headed in favorable direction and we can all rejoice in that. Friday’s selloff was a result of Powells ‘Hawkish’ sentiment – meaning, intent to lower inflation, tighten economic policy, raise unemployment, and influence economic slowdown. This sentiment, I believe, will lighten, as early as next month’s CPI numbers come in (likely lower than the previous month) and almost certainly by year’s end as we continue to see PCE, CPI and PCI number’s contract.
As always, I am an advocate for buying the dip and for buying companies that provide inherent and intrinsic value to our society. Time is the only culprit here – but the duration does seem to be getting shorter and shorter for market recovery.
Below is your Weekly Market & Economic Update.
Interested in learning more? Schedule a call with me HERE.
Warmly,
Mark S Sauer
Market Update
Global Equities, Fixed Income & Commodities
Global Equities: Following Powell’s hawkish commentary from Jackson Hole on Friday market’s sold off heavily. The Nasdaq led the market lower, down -4.4% during the week, while the S&P 500 posted a -4.0% weekly loss and the Dow Jones Industrial Average finished down -4.2%. Developed International stocks struggled with a -3.1% pullback and Emerging Market equities outperformed during the week, up +0.3%.
Economic Update
Back to the Bull or Bear Retracement?
Jackson Hole’s Freefall: Sending markets into a freefall on Friday – Jerome Powell’s much anticipated speech in Jackson Hole, at the Fed’s annual Policy summit, took many investors by surprise. Fed Chairman, Powell, offered somewhat sobering news – that although the state of inflation is slowing, the current pace is “far short” of what the Fed needs to see to confidently state that “inflation is easing”. “Forceful and rapid action” was promised, even at the cost of higher unemployment and recessionary economic qualities.
Chart of the Week
Personal Consumption Expenditure Index
Our Chart of the Week is the annualized Personal Consumption Expenditure Index (PCE, orange line) along with the Core PCE (blue line, Ex-food and energy). While both measures are decelerating on an annual basis, the monthly pace of inflation is still growing slightly, which led Chairman Powell to step back from his comments the prior month that interest rates are at a “neutral” level presently and adopt a more hawkish tone at Jackson Hole. The underlying data shows strong inflationary pressure remains in housing and other services, offsetting the significant recent decline in gasoline prices.
