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Recap and Week Ahead | What is needed for a Fed Pivot? Thumbnail

Recap and Week Ahead | What is needed for a Fed Pivot?

There is always a disposition in people’s minds to think that existing conditions will be permanent.   When the market is down and dull, it’s hard to make people believe that this is the prelude to a period of activity and advance…  The one fact pertaining to all conditions is that they will change.”  – Charles Dow, 1900 

   Last week's market recap:

  • The S&P 500 was up 1.56% for the week.  Year-to-date the index is down -22.68%.
    • Large-Cap Value leads performance YTD at -15.96%
  • NASDAQ closed the week up .75% and is down -31.49% YTD.
  • Barclays Aggregate Bond index is down -15.95% YTD
  • 10-Year Treasury Rate increased, ending the week at 3.89% from 3.83% the prior week.
    • Fed Funds Target rate is 3.25%
  •  The 1-Year Treasury is yielding 4.18%
  •  A 6 Month Treasury is yielding 4.08%
    • What is your savings account rate?  If it didn’t increase recently, you may want to find a new savings account.

The week ahead, 10/10: 

  • Inflation Data: CPI
  • Big Bank Earnings
  • Retail Sales Data 

Quick Comments: 

U.S. equity markets tumbled on Friday as a stronger than expected jobs report increased the odds of more rate hikes by the Fed.  Good news = Bad 

OPEC+ announced its plan to reduce oil output by 2M barrels per day.  It is worth noting that the cut in production is expected to be closer to 1M barrels per day.  Regardless, it will upset the supply/demand imbalance.  Using the Strategic Petroleum Reserve to offset the imbalance is a temporary band-aid.  Looking ahead, oil may not be a near-term disinflationary force.  This may encourage Fed hawkishness.

Source JP Morgan

What is needed for a Fed pivot?

  • Rise in unemployment
  • Peak inflation (month over month reductions)
  • Below average growth
  • Or something breaks.  Such as... The Fed needing to lower rates to pay for the interest expense from higher rates on Government debt.  Think about that feedback loop! 

We aren’t there yet on any of these factors.  Things could certainly get worse before they get better, but this could be “the prelude to a period of activity and advance.”  

Every bear market has had two things in common:

  • It ends
  • Expected returns go up

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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