For Week Ending October 30th, 2022
Inflation continues to drive the narrative – with PCE coming in even higher this month.
Nearly all of the Fed members seem to be in support of the continued rate hikes. While very few members have apprehension that the Fed may overshoot its ‘disinflationary’ goal – and instead engender deflation – by not giving existing rate hikes sufficient time to work through the economy before implementing additional increases.
In the meantime, nearly all of the post pandemic stock market gains have been given back. And, with mortgage rates now set to exceed 7%, the Case-Shiller Home Price Index has been falling faster than anytime in history during the month of July.
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: Markets tested and ultimately broke below the June lows this week in volatile trading. The S&P 500 closed with a weekly loss of -2.9%, the Nasdaq fell -2.7%, and the Dow Jones Industrial Average fell -2.9%. Developed International stocks were down -1.3% and Emerging Markets underperformed with a -3.1% loss for the week.
Economic Update
August Inflation, Mortgages & Fed Update
August Inflation Data: The Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditure (PCE) Index, showed hot inflation persisting in August. Month-over-month inflation data rose 0.4%, an uptick from July’s revised –0.2% reading. The Core PCE data, excluding food and energy, shot up 0.6% in August after a flat July reading. Year-over-year, Core PCE is 4.9%, giving the Fed little reason to pause its aggressive rate hike campaign.
S&P 500
Our Chart of the Week shows the S&P 500 shown on a weekly time frame – which covers the 2020 Covid-19 collapse and subsequent recovery, followed by 2022’s bear market selloff. As we enter the fourth quarter, we are at a critical moment as the market attempts to contain losses and bounce off a double-bottom from June’s market lows of 3,600 (purple line). This range coincides with the 200-week moving average (red line) which provided good support this morning. However, the S&P looks to be in danger of breaking down, in which case we will likely test 3,300’s double-bottom from Sept-Oct 2020 (green line) as the next support level and will have given back all the post-pandemic market gains. Given the Fed’s relentless attempt to slow the economy, to combat inflation, further breakdown seems somewhat imminent.
