Hawkish comments by Fed Chair Jerome Powell, following the announcement of another 75 basis points interest rate hike last week, cast a pall over financial markets, sending yields higher and stocks lower.
The Standard & Poor’s 500 declined 3.35%, while the Dow Jones Industrial Average slipped 1.40%. The Nasdaq Composite index lost 5.65% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, fell 1.04%.1,2,3
The official statement released following the Federal Open Market Committee (FOMC) meeting appeared to suggest a potential for future easing of interest rates. Investors cheered the news, sending stocks higher. But the optimism was crushed 30 minutes later on hawkish comments by Fed Chair Powell during his post-meeting press conference.
Losses accelerated into Thursday, led by technology names, which were under pressure due to rising bond yields. The yield on the two-year Treasury note rose to its highest level since 2007. The sentiment took damage from workforce reduction/freeze news from multiple technology companies; some considered it a sign of a pending recession. Stocks managed to erase some of the week’s losses on Friday following a strong employment report and a drop in the U.S. dollar.4
From Dove to Hawk in 30 Minutes
In the statement accompanying the 75 basis point rate increase, the FOMC said that future increases would consider the cumulative monetary tightening to date and the lag in impact such tightening involves.5
But in his post-meeting press conference, Fed Chair Powell struck a more hawkish tone. He said that current inflation data did not support any slowdown in rate increases and that the terminal rate (the point at which rates will no longer rise) may be higher than initially expected.6
Note that the first statement is the consensus of the committee and the second is the view of Powell. Clearly there is less unanimity on the committee than before.
About 3 months ago, on July 11, the S&P 500 Index was down 19.13% for the year and I wrote in my weekly update, "I feel that the chances are about equal that the next move for equities overall will be up vs. down." I was telling people I talked to that if I had to guess stocks would most likely go sideways ( equally up some down) for the rest of the year.
So where are we since then? Well there was what in hindsight we can see was a Bear Market Rally which peaked on August 16th. Then a steady decline to October 12th when the S&P was down very nearly 25% on the year. As I write this the index is down 20.58% for the year - less than 2% different from July 11th.
I still don't see much happening to change the trend this year, but at today's price I think the broad index is fairly priced. If your time horizon is long, your bigger risk may be holding too much cash.
This Week: Key Economic Data
Thursday: Consumer Price Index (CPI). Jobless Claims.
Friday: Consumer Sentiment.
Source: Econoday, November 4, 2022
gagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
This Week: Companies Reporting Earnings
Tuesday: The Walt Disney Company (DIS).
Wednesday: Roblox Corporation (RBLX), Occidental Petroleum Corporation (OXY).
Thursday: Becton, Dickinson and Company (BDX).
Source: Zacks, November 4, 2022
"If you would be loved, love and be lovable."
– Benjamin Franklin
Learn About ABLE Accounts
People with disabilities can use an Achieving a Better Life Experience (ABLE) account to help pay qualified disability-related expenses. Here are some things to know about ABLE accounts:
* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov7
Stay Hydrated With Infused Water
Staying hydrated is essential for our overall health, and these fun, delicious infused water options make drinking water a little more fun. Bonus points if you try them with sparkling water for a bit of fizz!
To infuse your water with these delicious combinations, just put all the ingredients in a pitcher, add water, and remove the fruits, veggies, or herbs in 24 hours. Drinking water has never been tastier or more beautiful.
Tip adapted from Culinary Hill8
Create a 13-letter word using all 13 of the following letters: O A I I S T T R R D N A M.
Last week’s riddle: What is worn by the foot and often bought by the yard? Answer: Carpet.
Iguazu Falls, Argentinian National Park, Argentina.
Footnotes and Sources
2. The Wall Street Journal, November 4, 2022
3. The Wall Street Journal, November 4, 2022
4. The Wall Street Journal, November 3, 2022
5. The Wall Street Journal, November 2, 2022
6. The Wall Street Journal, November 2, 2022
7. IRS.gov, July 20, 2022
8. Culinary Hill, May 19, 2022
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Weekly Market Insights: Stocks Slip After Powell Comments
November 07, 2022