Summary:
This week’s highlights were the US midterm elections, the CPI report and the FTX crypto exchange bankruptcy.
The annual inflation rate in the US slowed for a fourth month to 7.7% in October of 2022, the lowest since January, and below market forecasts of 8%. It compares with 8.2% in September. Compared to the previous month, the CPI rose 0.4%, the same as in September and below expectations of a higher 0.6% rate. After the release of the CPI data, the markets rallied amazingly. What a
reaction! But the bear market is not over. If a serious recession is on
the way, the next 6 months will not have an upwards direction on the
stock markets. Geopolitical instability and the energy crisis are not
over! If we continue with a relatively high inflation, with declining
earnings and with a softening economy the stock valuations will have to
continue the re-pricing over the next months.
The University of Michigan consumer sentiment for the US fell to 54.7 in
November of 2022, the lowest since July, from 59.9 in October and below
market forecasts of 59.5. The current economic conditions index sank to
57.8 from 65.6 and the expectations gauge tumbled to 52.7 from 56.2.
Meanwhile, inflation expectations increased for both the year ahead
(5.1% vs 5% in October) and the next 5 years (3% vs 2.9%).
Next week, in the US, the most important economic releases include retail sales, producer prices, and housing data.
Economic data source: Trading Economics
Politics in the US
Video: Celente and the Judge: How Low Can Amerika Go
Channel: Gerald Celente
A Stock Market Relief
Video: A Fierce Reaction in Markets
Channel: Bloomberg Markets and Finance
The Cryptocurrency Collapse and What to Look for in the Markets and in the Economy
Video: Crypto Scandal – Collapse Has Just Begun | Doomberg
Channel: Liberty and Finance
A Walk Around the Markets
US equities closed Friday session higher after a choppy morning session, extending Thursday’s sharp gains prompted by weaker-than-expected CPI reading for October which reinforced the case for only a modest 50 bps hike in December. The S&P 500 closed up 1%, bringing the weekly gain to 5.9%, the strongest since June. The Nasdaq 100 rose 1.9%, closing the week almost 9% higher, the best performance in 2 years as a sharp decline in Treasury yields brought respite to beaten-down technology and other high-growth stocks. Meanwhile, the Dow was up 0.1%, adding 4% on the week as China eased some Covid restrictions sparking gains for US-listed Chinese stocks and commodities while fresh turmoil in the crypto space spooked some investors. FTX exchange has officially filed for bankruptcy, pushing cryptocurrencies sharply down while sending shockwaves through other risk asset classes.
Silver futures rose sharply to above $21.8 per ounce, the highest since June, and tracking other bullion assets after cooler-than-expected inflation pressured the US dollar and Treasury yields. Consumer prices rose by 7.7% annually in October, slowing for the fourth month from the peak hit in June. The Federal Reserve is expected to raise interest rates by 50bps in its December meeting before reaching a terminal funds rate of 5% in March, well below bets of 5.5% from before the CPI print. While bullion is commonly used to hedge against inflation, higher interest rates increase the opportunity cost to hold non-interest-bearing assets, denting its appeal.
