Markets “In a Nutshell” for September 6, 2022
Investment Week at a Glance
Stocks finished lower for the week. The Dow Jones Industrial Average fell 3.00%, the S&P 500 was down 3.30%, and the NASDAQ fell 4.20%. Foreign stocks (MSCI EAFE) were also down, falling 4.90%. Bond prices were down for the week, with the 10-year U.S. Treasury ending the week at 3.20%. (Data source: Wall Street Journal)
Markets Heading into End of the Year
Markets continue to see volatility and had another substantial down week as equities moved lower by 3%-5%. As we head into the end of the year, expect volatility to continue as the Fed is expected to continue hiking rates. The next rate hike is expected to be 0.75% which will take place two weeks from now. We could start to see market volatility subside once we get through midterm elections in November as the market will gain clarity around what the government will look like for the next couple of years. By midterms, the Fed will also have had 2 more meetings to raise rates which could be one of the last meetings where they continue to raise rates before we see a pause in hikes. Once the Fed stops raising rates, the market will be able to price in a set rate rather than trying to predict at what point the Fed will stop raising rates.
Economic Outlook
Although the economy has contracted in the past two quarters, the labor market is still going strong. The unemployment rate sits at 3.7% which is near all-time lows and considered full employment in the economy. Another positive is that the labor force participation rate is on the rise which could relieve some inflationary pressures and reduce the shortage we have of workers currently. We still have roughly 2 open jobs for every unemployed person in the United States. This along with other factors such as higher mortgage rates, and lower energy costs could help inflation to move lower as we head into the end of the year. This would be a positive for markets as inflation continues to be the main worry of investors.
Quiz:
Quiz
How many unemployed people are there currently in the Unites States? (Scroll Down for Answer)
Answer below.
Have a Great Week!
Answer:
4) 6 million … the total number of unemployed people rose in August by about 350,000 due to the rise in the labor force participation rate. While an increase in unemployed people is typically a bad thing, with the need for labor we currently have the more people in the labor force looking for work the better. If we continue to see increases like this for months to come this could cause worry and bring a consensus on being in a recession.