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Market Recap – August 15, 2022

Keel Point

August 15, 2022

U.S. stock markets last week again reacted positively to economic and earnings data, reminding us that the stock market is a discounter of future economic conditions and expected Fed actions – not economic conditions today or last month.

  • Headline CPI for July is unchanged with a good chance it will fall in August, as a result of declining gasoline prices which were down 7.7% in July and expected to fall by another 11% in August.
  • Core CPI was up a modest 0.3% month over month in July which is an annualized rate of 3.8%. Over the past 12 months core inflation is up 5.9% but with a now much improving outlook – which the stock markets are seeing as increasing the probability of more benign Fed interest rate increases in September, November and December.
  • Consumer sentiment (University of Michigan) improved in August, helped by falling gasoline prices. Current conditions are still vexing consumers but their outlook is much improved.
  • U.S. and European earnings are coming in better than expected at 9% and 16% (y/y), respectively, with nominal sales growth at 15% and 28% (JPMorgan).
  • China’s economy is slowly but steadily growing as it eases zero-Covid-tolerance restrictions, which is a positive counterweight to slowing growth elsewhere. It provides propulsion without straining energy and commodity prices.
  • We will have another round of monthly reports on employment growth, personal consumption expenditures price inflation, CPI and other economic data before the mid-September Fed meeting, so plenty of opportunity for volatility in financial markets.

Positive movement in the Leading Indicators Index, earnings per share growth and a positive yield curve are important to positive stock market performance, so we continue to watch them carefully.

Disclosure: Securities offered through Keel Point Capital, LLC, Member FINRA and SPIC. Brokerage and Investment advisory Services are offered under the Keel Point brand. Investment Advisory services offered by Keel Point, LLC an affiliate of Keel Point Capital, LLC. While reasonable efforts have been made to provide data from sources considered to be reliable, no guarantee of accuracy is given. Keel Point does not give tax, accounting, regulatory, or legal advice to its clients.

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