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Market Recap and the Week Ahead (Terminal Rate) Thumbnail

Market Recap and the Week Ahead (Terminal Rate)

"Everybody gets so much information all day long that they lose their common sense."  - Gertrude Stein   

Last week's market recap:

  • The S&P 500 was up 3.31% for the week.  Year-to-date the index is down -9.34%.
    1. Large-Cap Value leads performance YTD at -7.31%
  • NASDAQ closed the week up 3.10% and is down -16.21% YTD.
  • 10-Year Treasury Rate increased slightly, ending the week at 2.85% from 2.83% the prior week.
  • The 1-Year Treasury is yielding 3.28%
    1. Fed Funds Target rate is 2.50%

The week ahead, 8/15: 

  • Retail Sales Growth and Earnings from Walmart, Target, Lowes, Home Depot, Kohl’s, etc.
  • Housing data: Building permits, housing starts, existing home data. 
  • Dog Days of Summer:
    • Typically lighter trading volume
    • Many people on vacation


Quick Comments:

For investors, you need to know and understand the “Terminal Rate” – the expected peak of the Fed’s interest rate cycle.  Inflation and Recession have dominated the headlines for many months but determining the Terminal Rate is extremely important in the coming months.  Until then, we may remain in the good news is bad, bad news is good cycle.    

This week for example: If retail sales and home prices are strong (good news), the market and the Fed may view it as inflationary; therefore, pushing the expected terminal interest rate higher (bad news).  If we get data pointing us towards a recession (bad news), expectations of the terminal rate get lower (good news).     

Last week, we finally got some relief in the inflation numbers mainly due to a decrease in energy prices; however, food and shelter remain persistent.  While inflation is expected to trend lower, it may be difficult to return to the Fed’s target anytime soon.  The data dependent Fed is expected to continue raising rates until the end of the year, so the market’s expectation for rate cuts in 2023 seems somewhat out of sync. 

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


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® 

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