Market Update: December 2, 2022

Welcome to the Weekly Market Update from Signature Wealth Management. I’m Brian Ransom, Research Director from Signature Wealth, and here’s what happened in the market this week.

 

We’ve had a fairly decent quarter so far in the market. We are in the midst of a 14% rally from the lows established early October. This follows a 17% bear market rally back in the summer. Until sustained market strength breaks the downward trend, it is still a safe assumption that this rally could be another bear market rally.

In the news this week, the November unemployment report showed sustained strength in the labor market with unemployment remaining stuck at 3.7%. Gas prices continue to drop across the country with a handful of states showing $3/gallon or lower. And Federal Reserve Chairman Jerome Powell signaled earlier this week that the central bank is ready to slow the pace of interest rate hikes.

Following the news release from Mr. Powell, the market had a fairly significant rally and so far as sustained that rally. This also coincided with a rally in the bond market and a 35-basis point drop in the 10-year treasury yield. The combination of a stock market rally and a bond market rally ultimately means that financial conditions are easing. But I’m not entirely sure this is the reaction that Powell desired.

Remember, Powell said that they’re “slowing down” rate hikes. Not stopping. And certainly not reversing course. Which means higher interest rates on the Fed Funds rate, higher rates for borrowers, and a tighter money supply. Maybe they’re not increasing rates as fast, but they’re still increasing. This means that the markets interpretation from Powell’s press conference of “easing financial conditions” is probably not correct. Powell himself said “we have a long way to go in restoring price stability.” Which doesn’t sound like the Fed is changing course at all.

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Sources:

1.FactSet Research Systems. (n.d.). S&P 500 (Interactive Charts). Retrieved December 2, 2022, from FactSet Database.

2.FactSet Research Systems. (n.d.). S&P 500 (Interactive Charts). Retrieved December 2, 2022, from FactSet Database.

FactSet Research Systems. (n.d.). Total CPI y/y% & Fed Funds Target Rate (Interactive Charts). Retrieved December 2, 2022, from FactSet Database.

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