In this week’s recap: U.S. and U.K. see financial turbulence.
Weekly Economic Update
Presented by Rabenold Advisors, October 3, 2022
THE WEEK ON WALL STREET
Rising recession fears and uncertainty in the bond and currency markets sent stocks to new 2022 lows last week.
The Dow Jones Industrial Average declined 2.92%, while the Standard & Poor’s 500 slumped 2.91%. The Nasdaq Composite index fell 2.69%. The MSCI EAFE index, which tracks developed overseas stock markets, lost 1.94%.1,2,3
A TUMULTUOUS WEEK
U.S. stocks were under pressure all week due to recession concerns and unsettled trading in the bond and currency markets. This stress followed economic steps out of the U.K. During the previous week, the Bank of England (BOE) raised interest rates, and its prime minister announced unfunded tax cuts that the markets interpreted as inflationary.
U.S. bond yields rose early last week, sending stocks lower until Wednesday’s rally following news that the BOE would buy U.K. government bonds. U.S. stocks resumed their descent the following two days to close out a disappointing week, month, and third quarter.
THE BANK OF ENGLAND ACTS
Global bond and currency markets have been volatile recently due to global central bankers raising interest rates to combat inflation. Developments in the U.K. took center stage last week when the BOE announced it would be buying long-dated U.K. government bonds. Upending the financial markets was the previous week’s announcement of tax cuts by the country’s new prime minister, a step many investors viewed as counterproductive to the BOE’s inflation-fighting efforts.
The BOE’s decision to begin temporary purchases of government bonds was well-received by capital markets, sending U.K. bond yields lower and boosting U.K. stock prices in the immediate aftermath.
T I P O F T H E W E E K
If you’re shopping for a homeowner policy, feel free to ask for a discount. If you can demonstrate that you are taking steps to reduce risk, you may be able to negotiate one.
THE WEEK AHEAD: KEY ECONOMIC DATA
Monday: Institute for Supply Management (ISM) Manufacturing Index.
Tuesday: Factory Orders. Job Openings and Labor Turnover Survey (JOLTS)
Wednesday: Automated Data Processing (ADP) Employment Report. Institute for Supply Management (ISM) Services Index.
Thursday: Jobless Claims.
Friday: Employment Situation.
Source: Econoday, September 30, 2022
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
THE WEEK AHEAD: COMPANIES REPORTING EARNINGS
Wednesday: Lamb Weston (LW).
Thursday: Constellation Brands, Inc. (STZ), McCormick & Company, Inc. (MKC), Conagra Brands (CAG).
Source: Zacks, September 30, 2022
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.
Q U O T E O F T H E W E E K
“The trust of the innocent is the liar’s most useful tool.”
T H E W E E K L Y R I D D L E
Seven people stand in a square room which measures 30′ x 30′. Each one can see the entire room and everyone in it without making any physical movement (aside from eye movement). Where inside this room can you place an apple so that all but one person can see it?
LAST WEEK’S RIDDLE: Alexandra’s mom had four children. The first one was named May, the second was named June, and the third was named August. What was the fourth child’s name?
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Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.
The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.
The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.
U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.
Please consult your financial professional for additional information.
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2. The Wall Street Journal, September 30, 2022
3. The Wall Street Journal, September 30, 2022