Stocks and Bonds Down Modestly on Fed Speeches
Last week, the Dow (-0.1%), NASDAQ (-2.4%), and S&P 500 (-1.1%) had modest losses. Similarly, taxable bonds fell a little more than 1% while tax-free municipal bonds fell a little less than 1%. Stock and bond prices fell last week for the same basic reason – inflation and interest rate concerns.
During the week, several members of the Fed (including Chairman Powell) gave speeches and interviews warning the markets of the possibility of further rate hikes and keeping interest rates higher for longer than the markets may be expecting. Of course, this sends both the stock and bond markets down, but only modestly. The concern for higher interest rates was further justified by a strong unemployment report on Friday. Key inflation indicators this week (CPI on Tuesday and PPI on Thursday) will attract the attention of investors and economists, so the markets can be expected to respond to those reports.
Corporate earnings season is winding down, and earnings have been roughly in line with expectations. However, corporations are warning of reduced profits in the coming months and quarters. While still profitable, corporate earnings are about 5% lower than the same quarter a year earlier. Earnings growth of S&P 500 companies is estimated to be a tepid 4% for 2022 and 2.4% for 2023. This provides evidence that the interest rate hikes and tight monetary policy are working their way into the economy.
About the Author: Michael Menninger, CFP®️
Michael Menninger is the founder and president of Menninger & Associates Financial Planning. With 20+ years of financial planning experience, Michael helps his clients pursue their financial goals through a hardworking, common-sense and detail-oriented approach to financial planning. He provides personalized service, builds lasting relationships, and maintains a disciplined, long-term outlook. He uses his experience and wide-ranging business and educational background as a basis for creating financial plans unique to each client's goals and aspirations.
Topics discussed and disclosures displayed in articles dated prior to November 28, 2022 reflect the requirements from previous Broker-Dealers. Please see the footer of the website for how services are currently provided.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
