Markets “In a Nutshell” for June 13, 2022
Investment Week at a Glance
Stocks finished lower for the week. The Dow Jones Industrial Average fell 4.60%, the S&P 500 was down 5.10%, and the NASDAQ fell 5.60%. Foreign stocks (MSCI EAFE) were also down, falling 2.80%. Bond prices were down for the week, with the 10-year U.S. Treasury ending the week at 3.16%. (Data source: Wall Street Journal)
The May reading on inflation was released on Friday and came in above expectations. CPI (consumer price index) year over year increased by 8.6% well above the 8.2% estimate. Markets did not react kindly to this number as the market was hoping to see inflation move lower instead of higher. Many believed inflation would start to decline by now because May of 2021 was when we started seeing inflation above 5% meaning these high inflation numbers now are on top of other high inflation numbers a year ago. With inflation continuing to rise, the market continues to price in the rising possibility of a recession. The market volatility is expected to continue as we deal with inflation, recession worries, and the ongoing conflict in Ukraine as Russia is slowly making advances.
The Fed June meeting is taking place this week on Tuesday and Wednesday and the market will be paying close attention to what Fed Chair Powell has to say. It is expected we will see another 0.50% rate hike but some are calling for a larger rate hike as inflation once again came in hotter than expected. If we see a larger rate hike, expect markets to decline as higher rates put pressure on equities, especially the growth sector. The Fed continues to have the tough task of slowing inflation while trying to avoid sending the economy into a recession. As inflation continues, the likelihood of a soft landing by the Fed becomes less and less as rates will need to continue to rise.
How often does the FOMC (Federal Open Market Committee) meet per year? (Scroll Down for Answer)
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4) 8. The FOMC meets every 6 weeks, at these meetings they discuss monetary policy and vote on policy. The most important thing that comes out of these meetings is the change in interest rates which is currently the most important issue for the market.