Markets “In a Nutshell” for October 3, 2022
Investment Week at a Glance
Stocks finished lower for the week. The Dow Jones Industrial Average fell 2.90%, the S&P 500 was down 2.90%, and the NASDAQ fell 2.70%. Foreign stocks (MSCI EAFE) were also down, falling 1.90%. Bond prices were down for the week, with the 10-year U.S. Treasury ending the week at 3.82%. (Data source: Wall Street Journal)
Stocks Continue Decline
The market once again fell lower this past week and is once again in bear market territory for the year. We are now at levels on the S&P 500 that we have not seen since November of 2020 as we have gone through the June lows, we saw earlier this year. One major reason for this decline is that the market is now pricing in the chance of a recession near 70%. The main contributor that is causing recession fears, is the Fed continuing to raise rates aggressively and saying they will continue to do so until inflation moves lower. With that being said, many believe a recession would be short because of the strength in the labor market as we continue to have unemployment under 4% which is considered to be full employment. As the US economy is driven by the consumer having strong employment
Market Declines in Recessions
When looking at market declines in shallow recession historically, we see that the typical downturn in the market is 25%-35% and lasts roughly 10-15 months. The recovery period for these market declines has lasted anywhere from 9 months to 2 years. In deep recessions we see the market decline and recovery period double in some instances. With the belief that if we see a recession, it will be a shallow one, we may have done most of the work to the downside as we are down 25% currently. The market could see some more downside as the Fed continues to raise rates, but the belief is the Fed has done most of its work already. It is expected we see 2 more hikes this year, but we could see a pause at the beginning of 2023. This could give some relief to the economy and market and could cause a turnaround for the market.
When was the last time the US Dollar was worth more than the Euro? (Scroll Down for Answer)
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3) 2002, The last time the Dollar was more valuable than the Euro was in July, 2002. Once again the Dollar is more valuable than the Euro as the current rate is $1 is equal to €1.02.