Recap and the Week Ahead | Bonds

There are no bad bonds, only bad prices – Trader's Axiom

Last week's market recap:

The S&P 500 was down -1.53% for the week. Year-to-date the index is down -23.88%.
- Large-Cap Value leads performance YTD at -16.53%
NASDAQ closed the week down -3.11% and is down -33.61% YTD.
Barclays Aggregate Bond index is down -15.84% YTD
10-Year Treasury Rate increased, ending the week at 4.02% from 3.89% the prior week.
- Fed Funds Target rate is 3.25%
The 1-Year Treasury is yielding 4.44%
A 6 Month Treasury is yielding 4.33%
- What is your savings account rate? If it didn’t increase recently, you may want to find a new savings account.

The week ahead, 10/17:

Earnings Season
Housing Starts
Existing Homes Sales
Industrial production

Quick Comments:

The September CPI report crushed hopes for lower inflation. However, a few hours after the disappointing data was released, we saw one of the largest intra-day reversals of all-time. This is a great example of how markets can act during times of inflation, recessions, war, uncertainty, etc. --- with extreme volatility.

Simply explaining the numbers…

Services inflation increased more than the decrease in core goods and energy so we had a higher than expected inflation print.

Additionally, the lagged effect of rising rents continues to propel owner's equivalent rent higher.

What is “owners equivalent rent?”

It represents roughly 25% of the Consumer Price Index (CPI). It is determined by a monthly survey of consumers who own a primary residence. I repeat… determined by a survey! Not a transaction in the real economy. A survey!

https://www.investopedia.com/terms/o/owners-equivalent-rent.asp

For the Fed: the September CPI report, Producer Price Inflation (PPI), and a strong Jobs report, gives them little reason to deviate from their hawkish stance.

Markets are expecting the Fed to raise interest rates by 0.75% next month, followed by another 0.50% increase in December.

It's not good for bonds when you're compared to the years 1721 and 1865!!!

As always, let us know if you have any questions.

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®

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