Market Recap and Week Ahead | "The Fed Whisperer"
Every market valuation is a number from today multiplied by a story about tomorrow. – Morgan Housel
Last week's market recap:
- The S&P 500 closed the week up 4.75%. Year-to-date the index is down -20.25%.
- Large-Cap Value leads performance YTD at -13.25%
- NASDAQ closed the week up 5.22% and is down -30.16% YTD.
- Barclays Aggregate Bond index is down -16.62% YTD
- 10-Year Treasury Rate increased, ending the week at 4.21% from 4.02% the prior week.
- Fed Funds Target rate is 3.25%
- The 1-Year Treasury is yielding 4.61%
- A 6 Month Treasury is yielding 4.50%
- What is your savings account rate? If it didn’t increase recently, you may want to find a new savings account.
The week ahead:
- Busy Earnings Week
- PCE Price Index (Inflation)
- GDP Report
- Housing Data
The S&P 500 rallied 2.37% on Friday. It was sparked by a Wall Street Journal article titled, “Fed Set to Raise Rates by .75 Point and Debate Size of Future Hikes.” It was written by Nick Timiraos, aka “The Fed Whisperer.” When Nick Timiraos speaks, the market listens.
Markets hate uncertainty. Data releases and events over the next few weeks should lift some this uncertainty and provide a clearer picture of the outlook.
- GDP Report: This could show surprising strength; however, real GDP could easily contract in both the fourth and first quarter as the Fed’s rate hikes filter into the system.
- Personal Consumption Expenditures (Inflation data without food and energy) We may see a month over month increase; however, there may be much softer numbers ahead. Data is showing an easing of supply chain problems, inventory builds, and lower commodity prices.
- Next week’s data on Job openings and employment. A big focus will be on wage gains. Average hourly earnings seem to be growing slower than consumer prices. This trend could help slow inflation pressures.
- Earnings: Many major companies are reporting earnings this week. We’ll get a clearer picture of the health of corporations.
- Mid-term elections: Republicans are expected to control the House. Senate race is too close to call. If Republicans control even one house of Congress, fiscal gridlock would be the likely outcome. That means no major tax or spending policy changes until after the next presidential election.
- Fed Meeting on Nov 2nd: 75bps hike is expected. The Fed’s signaling on its December move is extremely important. Right now, the Fed Futures market is pricing in a 44% chance of another 75bp hike in December.
While the data coming in over the next few weeks may not all be market friendly, eliminating some of the uncertainty should be a positive on its own.
As always, let us know if you have any questions.
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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