Stock prices were up this past week even as interest rates also were higher, adding to the conflicting signs of a stronger economy and possibly slowing inflation pressures. This is a good reminder for staying invested as we work through the cyclical “Bear Market”.
- The S&P 500 was up 4.6% last week at the same time the 10-year U.S. Treasury rose to 4.2% from the prior week’s close at 4.0%. Month to date the S&P is up 2% while the Barclay’s AGG is down 3%.
- On the earnings front, about 70% of companies are beating Q3 earnings estimates, and more companies are raising their forecasts than lowering them.
- Inflation is declining but not always in the way we report it. Quarterly inflation annualized was approximately 10% in Q1 and Q2, but 2% in Q3. There are reasons to be cautious about annualizing quarterly data, but it is also helpful to see signs that monthly/quarterly inflation numbers are coming down.
The recurring question among clients is about whether there will be a recession. Most likely a recession is coming sometime during the next 12 months as the Fed continues to put the brakes on the economy, but it most likely will be shallow and short lived.
- The U.S. economy is in pretty good condition: strong labor market, heathy consumer and corporate balance sheets, attractive equity valuations, and inflation showing signs of declining.
- Policy mistakes are a bigger risk as the economy is slowing and as inflation data are showing conflicting directions. Geopolitical risks can also disrupt positive growth, and the war in Ukraine is a catalyst for economic disruptions in Europe and the developing world.
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.