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Market Recap – September 6, 2022

Keel Point

September 6, 2022

 The August new jobs report last Friday was good news in several respects: slower pace of growth, lower wage rate growth, and increase in labor force participation. 

  • Slower wage growth is the first thing the Fed needed to see to start leaning more towards a 50bp rate increase at its September 20-21 meetings. 
  • Higher labor force participation reflected more new people joining the labor force looking for work than net new hires, thereby reducing the gap between job vacancies and unemployed persons looking for work – also important to the Fed. It also caused the unemployment rate to tick up to 3.7%. 
  • Next Tuesday’s (September 13) release of September CPI inflation also will impact what the Fed decides about the next Fed Funds rate increase. A further decline in headline and core inflation will likely allow the Fed to ease back to a 50bp rate increase. 

Stock markets are down a second week in a row following the Fed Chair’s Jackson Hole speech raising concern about how high the Fed will raise interest rates and whether the U.S. will end up in a recession. 

  • With energy, food and auto prices dropping, the August CPI inflation number could be helpful. Overall, price declines are signaling a good chance that headline inflation could be back close to 2% by mid-2023, giving the Fed an opportunity to begin cutting rates. 
  • Recession fears continue to be overstated. Current U.S. economic data show positive growth for the second half of 2022, albeit slowing, with Q3 GDP growth likely in the range of 3% annualized. 
  • Asia is expanding, with China supporting is property market and promoting overall growth as it emerges from its Covid lockdowns. 
  • Longer-term Treasury yields likely will soften for the rest of 2022. 

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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