In Markets "In a Nutshell"

Markets “In a Nutshell” for September 19, 2022

Investment Week at a Glance

Stocks finished lower for the week.  The Dow Jones Industrial Average fell 4.10%, the S&P 500 was down 4.70%, and the NASDAQ fell 5.50%. Foreign stocks (MSCI EAFE) were also down, falling 2.70%.  Bond prices were down for the week, with the 10-year U.S. Treasury ending the week at 3.45%.  (Data source: Wall Street Journal)

Inflation Worries Continue

The most recent CPI (consumer price index) report was released on Tuesday last week and showed an increase of 8.3% for the last 12 months compared to the 8.1% estimate. Core CPI which excludes food and energy was 6.3% which is the highest since March. These numbers were not good for the market as many thought we would see inflation begin to come down. The market reacted by having its worst day in over 2 years going back to 2020 early on in the pandemic. With these inflation numbers continuing to remain at historically high levels, the market worries if the Fed will have to raise rates further than expected to try and tame inflation.

Fed Meeting

The Fed will have its much-anticipated meeting from Tuesday – Wednesday this week as we expect to see another 0.75% rate hike by the Fed. If the Fed decides to act more aggressively after seeing this most recent CPI report the market would likely move lower as a full 1% is not expected. With the market pretty sure of a 0.75% rate hike, more attention will be paid to Fed Chair Powell’s remarks and what he has to say about the economy and rate hikes moving forward. The market should be able to gauge what the Fed’s view is on the economy and future rate hikes by Powell’s tone on the market and economy. With inflation remaining high and the Fed continuing to raise rates while we already have seen 2 quarters of GDP contraction, the likelihood of a “soft landing” by the Fed has become less and less.

Quiz:

Quiz

By what percent has the 2-year US Treasury yield increased? (Scroll Down for Answer)

  1.    1600%
  2.    1200%
  3.    800%
  4.    400%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Answer below.

 

 

Have a Great Week!

 

 

 

 

 

 

 

 

 

Answer:

1)    1600%.  The 2-year US Treasury Yield was 0.2158% a year ago and today is above 3.9%. The 2-year is now also yielding more than the 5, 10, and 30-year US Treasuries.