facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause
Last Week's Recap And The Week Ahead (Red Light, Green Light) Thumbnail

Last Week's Recap And The Week Ahead (Red Light, Green Light)

While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses. Jerome Powell - 8/26/22 Jackson Hole Symposium

Last week's market recap:

  • The S&P 500 was down -4.02% for the week.  Year-to-date the index is down -14.00%.
    • Large-Cap Value leads performance YTD at -7.80%
  • NASDAQ closed the week down -4.43% and is down -21.99% YTD.
  • 10-Year Treasury Rate increased, ending the week at 3.04% from 2.98% the prior week.
    • Fed Funds Target rate is 2.50%
  • The 1-Year Treasury is yielding 3.41%
  • A 6 Month Treasury is yielding 3.31%
    • What is the rate on your savings account?  

The week ahead, 8/29: 

  • Unemployment rate and JOLTS
  • Manufacturing data
  • Corporate earnings season winding down


Quick Comments:

It feels like the market is playing the children's game “Red Light, Green Light” with the Fed.  Equity markets were running up too fast, and Jerome Powell sent them back. Equity markets took a dive on Friday after Jay Powell made it clear… No Pivot!  With inflation near 40 year highs, this shouldn’t be a big surprise.  The S&P 500 was up almost 18% mid-June to mid-August.  The Nasdaq was up almost 24% during the same time period.  The Ark Innovation ETF was up over 42% during the same time period, and even meme stocks were making a comeback.  That’s inflationary!  We need markets to remain cool to get inflation under control.  The Fed wants price stability.  It doesn’t feel good when you see massive sell offs in short periods of time, but the market is reacting to a potentially higher Terminal Rate.  That makes sense.  

Silver lining:  Short Term Treasuries yields are more attractive.  Many bond funds held up well. Meaning a traditional 60/40 portfolio did its job.  The markets are starting to react the way they should because bond yields are no longer zero.  This is good news!  We need inflation to cool off, especially in the housing market.  Some data is already starting to show a cooling in the housing market.  So maybe the Fed pausing (Green Light) isn’t too far away, but just like the game, proceed with caution.  Markets are expecting September to have another 50-75bp interest rate hike.  Markets may remain choppy.  Bad news may remain Good news.  Slower economic growth implies lower rates.        

Below is a chart from J.P. Morgan:


Below is a chart from Redfin.  For equity markets, this chart is "Bad news is good news."



To discuss in more detail, feel free to reach out to us.


Best, 

CRA Investment Committee 


Matt Reynolds CPA, CFP®

Tom Reynolds, CPA 

Robert T. Martin, CFA, CFP®

Gordon Shearer Jr., CFP® 

Jeff Hilliard, CFP®, CRPC®

Joe McCaffrey, CFP® 


Important Disclosure Information

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CRA Financial, LLC [“CRA]), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from CRA. Please remember to contact CRA, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. CRA is neither a law firm, nor a certified public accounting firm, and no portion of the commentary content should be construed as legal or accounting advice. A copy of CRA’s current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request or at www.crafinancial.com. Please Note: IF you are a CRA client, Please advise us if you have not been receiving account statements (at least quarterly) from the account custodian. 

Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results. It should not be assumed that your CRA account holdings correspond directly to any comparative indices or categories. Please Also Note: (1) performance results do not reflect the impact of taxes; (2) comparative benchmarks/indices may be more or less volatile than your CRA accounts; and, (3) a description of each comparative benchmark/index is available upon request.

Please Note: Limitations: Neither rankings and/or recognitions by unaffiliated rating services, publications, media, or other organizations, nor the achievement of any professional designation, certification, degree, or license, or any amount of prior experience or success, should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if CRA is engaged, or continues to be engaged, to provide investment advisory services. Rankings published by magazines, and others, generally base their selections exclusively on information prepared and/or submitted by the recognized adviser. Rankings are generally limited to participating advisers (to the extent applicable). Unless expressly indicated to the contrary, CRA did not pay a fee to be included on any such ranking. No ranking or recognition should be construed as a current or past endorsement of CRA by any of its clients. ANY QUESTIONS: CRA’s Chief Compliance Officer remains available to address any questions regarding rankings and/or recognitions, including the criteria used for any reflected ranking.