I can’t change the direction of the wind, but I can adjust the sails. – Jimmy Buffet
Last week's market recap:
- The S&P 500 closed the week down -1.26%. Year-to-date the index is up 17.45%
- NASDAQ closed the week down -1.92%. YTD the index is up 32.27%
- U.S. Aggregate Bond index was down -.30% for the week. YTD the index is up .59%
- 10-Year Treasury Rate increased, ending the week at 4.26% up from 4.18% the prior week
- Fed Funds Target rate is currently 5.25-5.50%
- The 1-Year Treasury is yielding 5.41%
- A 6 Month Treasury is yielding 5.53%
The week ahead:
- CPI – Inflation data
- Retail Sales
- Consumer Sentiment
Last week, good news was bad news for interest rates. Stocks were down as stronger than expected economic data was translated into rates could stay higher for longer. Technology stocks faced additional pressure as China placed a ban on using iPhones at government agencies.
The bond market and equity markets have been pricing in two completely different outcomes and it looks like they are both taking a step towards agreement. Interest rates may stay higher for longer than previously expected. Inflation is cooling, and the terminal rate seems to be in sight. Although markets have been resilient, recession fears still remain. Caution and patience may lead to attractive opportunities going forward.
Source: * JP Morgan Guide to the Markets
Why does the Fed aim for long term 2% inflation?
You can read the Fed’s answer here: https://www.federalreserve.gov/faqs/economy_14400.htm. Many industry experts simply say, “because 1% is too low and 3% is too high.” The Fed is data dependent. If the data shows that the Fed can achieve their mandate of maximum employment and price stability with an inflation rate between 2-3%, then their target could be adjusted.
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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