Prosperity Partners Blog
Meaningful Progess
There has been meaningful progress on the inflation front. The annual rate of inflation has slowed, and the ever-visible price of gasoline is well off last year’s high. But as every child has asked on a long road trip, “Are we there yet?”
Stocks Rally on Hope Inflation Will Slow
The U.S. Bureau of Labor Statistics reported another respectable employment number on Friday, illustrating that modest economic growth and a still-high number of job openings are boosting payrolls. But it was a smaller-than-forecast rise in wages that caught the attention of investors, and stocks rallied.
Shifting Forces
The market had a banner year in 2021, with the S&P 500 Index advancing over 25%, according to data from the St. Louis Federal Reserve. But tailwinds that fueled gains shifted dramatically in 2022. No longer were the economic fundamentals favorable.
Housing Activity Tumbles Off a Cliff
“The unfortunate cost of reducing inflation” could bring “some pain to households and businesses,” Fed Chief Jay Powell remarked in August. Pain is rarely distributed evenly. Some folks go unscathed, while others bear the brunt of the discomfort.
Not Even a Pivot with a Small ‘P’
After four-straight 75 basis-point (bp, 1 bp = 0.01%) rate increases, the Federal Reserve downshifted and boosted its key rate, the fed funds rate, by 50 bp last week to 4.25 – 4.50%. But it didn’t muddy its hard-hitting anti-inflation rhetoric.
A Nearly Perfect Recession Indicator Flashes Red
The Federal Reserve, interest rates, and inflation have been big topics this year. Chatter about a possible recession has been part of the conversation, too. A few weeks ago, we looked at the enormous amount of stimulus cash that remains in savings, which is cash that could support spending and delay the start of a recession. It’s an analysis that went against the grain of the consensus. But the stash of cash could eventually dry up.
Too Much Hiring
Can there be too much hiring? Can job growth be too fast? It seems like an odd question. But following a better-than-expected jobs report on Friday and the initial negative reaction (shares pared losses and finished mixed), the question is worth exploring.
A Big Pile of Cash on the Sidelines
Recession fears are rampant. Interest rates are up, which discourages spending, and housing, a leading economic indicator, has fallen into a steep recession. Reported on Friday, the Conference Board’s Leading Economic Index (LEI), which is designed to detect trends in advance, is down 8-straight months, including a sharp 0.8% decline in October.
A Soft Inflation Reading Fuels a Strong Rally
October’s slower-than-expected rise in the Consumer Price Index fueled a 5.53% rise in the S&P 500 Index on Thursday, which was the 15th-best trading day since 1953 when the 5-day trading week began, according to Bespoke.
Quarterly Market Summary and Outlook – October 2022
With another rocky quarter, equities continued their downhill slide with most equity indexes showing double-digit negative returns year-to-date (YTD).
Smaller Hikes but Longer to the Peak
The Fed may dial back the size of its rate increases—75 bp increases began in June—but the peak in the fed funds rate, what analysts are calling the terminal rate, could be higher than previously expected. And the Fed could maintain that level for a while.
Recession Averted
The U.S. Bureau of Economic Analyst reported that Q3 Gross Domestic Product (GDP), which is the largest measure of goods and services, expanded at an annualized pace of 2.6%, erasing the declines from Q1 and Q2—recession averted, for now.