Summary:
The week was agitated. The instability of the UK bond market and government, the still-hot inflation, the big market swings… What a week.
We can only hope that after the next FED meeting (or the US elections) things get a bit clearer, because right now the markets seem range bound and with aggressive mood swings. Is there going to be a little rally? Why knows! Right now the markets seem like an unpleasant place to be. If you have doubts, stay out. Volatility is hotter than inflation.
Hot Inflation
Sources:
Trading Economics (United States Inflation Rate)
“The annual inflation rate in the US slowed for the third month running to 8.2% in September of 2022, the lowest in seven months, compared to 8.3% in August but above market forecasts of 8.1%. The energy index increased 19.8%, below 23.8% in August, due to gasoline (18.2% vs 25.6%), fuel oil (58.1% vs 68.8%) and electricity (15.5% vs 15.8% which was the highest since 1981). A small slowdown was also seen in the cost of food (11.2% vs 11.4% which was the highest since 1979) and used cars and trucks (7.2% vs 7.8%). On the other hand, prices for shelter increased faster (6.6% vs 6.2%). Meanwhile, the core rate which excludes volatile food and energy, rose to 6.6%, the highest since August of 1982, and above market expectations of 6.5% in a sign inflationary pressures remain elevated.”
The FED Tightening is Here to Stay
Video: Fed’s Daly on Rate Hikes, Inflation, Policy Coordination
Channel: Bloomberg Markets and Finance
A Good Summary of the Macroeconomic Situation
Videos:
Marc Faber: A Massive Systemic Shock Is Coming & The Fed Is Actively Courting It
Marc Faber: ‘A Lot Of People Will Lose All Their Money’ – Huge Market Losses Lie Ahead
Channel: Wealthion
Liz Truss and Kwasi Kwarteng
US stocks extended losses on Friday, with the Dow losing nearly 400 points, and the S&P 500 and Nasdaq falling 2.1% and 3.1%, respectively. In the epicenter of the selloff was a report from the University of Michigan showing that US year-ahead inflation expectations increased for the first time in seven months. Such a reading put further pressure on the Federal Reserve to stick to its aggressive stance against runaway price growth and raised concern over a possible recession. Interest-rate sensitive tech shares declined over 2.5% on the news. Energy shares also declined over 3% as crude oil and other energy commodities declined. On the corporate side, JPMorgan, the biggest US bank by assets, rose more than 2% after reporting third-quarter results for profit and revenue that surprised investors on the upside. Wells Fargo also enjoyed some robust gains after revenue top estimates. The Dow was still up 1.2% this week, while the S&P 500 fell 1.3% and the Nasdaq 3.1%.
Gold prices decreased by more than 1% to under $1,650 per ounce on Friday, the lowest in over two weeks and approaching the 19-month low of $1,621 hit on September 26 as new macroeconomic releases supported bets that the Federal Reserve will continue to tighten monetary policy aggressively, strengthening the dollar. Data compiled by the University of Michigan showed that year-ahead inflation expectations rose for the first time since March, exacerbating concerns of unsustainable price growth after September’s CPI print was hotter than expected. In the meantime, ECB President Lagarde said that board members are considering unwinding the central bank’s EUR 5 trillion in bonds from its balance sheet, adding to the preference for currencies. Due to its weak position in an environment of rising interest rates, investors continued to shun gold and opt for yield-baring havens as a safe store of value amid surging inflation and heightened economic uncertainties.
