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Market Recap – November 21, 2022

Keel Point

November 21, 2022

This past week highlighted the ongoing struggle between the positive forces of lower inflation and Fed officials trying to prevent an outbreak of “irrational exuberance” in financial markets.

  • October CPI and PPI (Producer Price Index) inflation are lower on a monthly, quarterly and last 12 months basis. JPMorgan expects US inflation to average 4% this quarter vs 10% in the first half of 2022.
  • Internationally, Europe’s energy outlook has improved, and China is showing signs of starting to move away from COVID lockdowns and towards reopening production. Meanwhile, U.S. supply chain problems are mostly behind us.
  • Fed officials pushed back against markets reacting positively to weaker inflation: “still have a ways to go,” “one month’s data is not enough,” “will err on the side of irradicating inflation,” etc, all with the result that Fed Funds futures are pricing in a 5% peak in 2023 – but with rates declining in the second half of 2023.

Mid-term elections have left Democrats with control of the Senate and Republicans with its smallest majority in the House since 1932.

  • Biden Administration tax and spending initiatives are no longer likely to advance without Republican support or in a “lame duck” Congress before the end of this year.
  • Essential spending measures, and increasing the debt limit to finance Congressional spending, will become contentious and chaotic in 2023 and likely will increase financial market volatility in the event of a U.S. government shutdown or a default on its debt.
  • There is a strong chance that the SECURE 2.0 legislation will pass before the end of 2022, revising existing rules for retirement saving and required minimum distributions.
  • It is interesting to note that Florida Governor DeSantis’ gerrymander picked up 4 Republican House seats in 2022 and may have given Republicans their majority.

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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