For Week Ending September 9, 2022
I find it hard to believe that the we won’t see a massively positive change by end of year when it comes to this inflationary environment.
The Fed’s continued interest rate hikes, as well as Quantitative Tightening (QT) should slow inflation, and the economy. And it already has. Powell’s method and communication has been scrutinized for not being as ‘transparent’ as some would like. He’s kept investors in the dark and has not over promising anything – other than a “data driven approach” – which has certainly resulted in further speculation by ‘Mr. Market’. However, I continue to appreciate this strategy – he’s not changing his mind and/or needing to pivot last minute. He’s been straight forward and consistent when he executes.
No one has a crystal ball. I certainly do not. But I do have a hunch – based on the fundamental changes we’re seeing in the economy, inflation metrics slowing, and our technical perspective – that we’re nearing the end of this market contraction. Time will tell. But I do have a sneaking suspicion that we’ve already found our bottom. Let us hope.
Below is your Weekly Market & Economic Update by the numbers.
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Warmly,
Mark S Sauer
Market Update
Global Equities, Fixed Income & Commodities
Global Equities: Following three consecutive weekly losses, domestic equities were able to end the streak with solid gains. The S&P 500 ended the week +3.7% higher, the Nasdaq composite gained +4.1%, and the Dow Jones Industrial Average finished +2.7%. Developed International stocks were +3.3% higher. Emerging markets lagged with a weekly gain of +0.6%.
Economic Update
Fed Scrutiny, Job Market Strength & Quantitative Tightening
Fed Not Revealing its Hand: Several Federal Reserve officials spoke this week, including Chairman Jerome Powell. With market participants hanging on the Fed’s every word, there was heavy scrutiny for commentary that would offer insight on the path of interest rates for the rest of the year and beyond. The Fed continued to toe the line with its “data-driven” approach, however, suggesting the pace of rate hikes will be determined case-by-case at each meeting depending on the inflation data. All Fed officials favor additional aggressive near-term hikes, which has pushed the odds of a 75-basis point September hike up to 90%.
Chart of the Week
S&P 500
Our Chart of the Week is the S&P 500, showing the 50-day (blue line) and 200-day (red line) moving averages. Last week we mentioned 3900 (green line) as a crucial support level for the index, given the multiple prior tests at this level. This week, the S&P was able to rally off the 3900 level with a textbook bounce that also brought it back up above the 50-day moving average. This was a positive move for the market, although the jury is still out on whether the gains off the June low are a true reversal or just a temporary bear market rally.
