Weekly Market Update with Brian Ransom September 23, 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.
Volatility continues to grip the market this week. The market fell through the higher-low support area late last week. And declines continue today September, 23rd indicating that we may test those -23% lows established back in June.
The big news item of the week came from the Federal Reserve who elected to increase interest rates by another 75 basis points. Forward expectations on short term rates were also reset higher and for longer through the end of 2023. Following the meeting, a plethora of “bad news” headlines hit the news stands and panic continues to rise.
The collective panic combined with a Fed continuing to be restrictive on monetary policy means that it’s about time for the next step in the cycle. As covered last week, inflation unexpectedly increased month-over-month in August.
But don’t kid yourself, inflation is falling and prices with it. Crude oil is down nearly $40 a barrel from the June highs. Gasoline futures prices are nearly cut in half. And Producer prices have been steadily falling after peaking in June.
Which means we’re no longer talking about rising prices, but falling prices. Ultimately, falling prices translate into lower margins, lower earnings, and volatile stock prices for publicly traded companies. After recessions start, and panic starts to set in, forward earnings expectations shown in purple start to fall as we’ve seen in the Dotcom, Global Financial Crisis, and the Covid Pandemic. So far this year, earnings expectations have barely budged indicating that reality hasn’t yet set in that falling prices mean falling earnings and we’re just at the beginning stages of the next leg of the business cycle. It needs to be pointed out, however, that stock prices almost always start to rise before earnings start to recover. This means, earnings expectations are a notoriously lagging variable.
With that in mind, some important areas to watch are the June lows and the pre-pandemic highs. The pre-pandemic highs would correspond closely to the average bear market decline. Should we enter into a recession, that would be a key area to watch.
For more information on this topic or a variety of other topics including market updates, financial planning, and wealth management please visit our vlog at signaturewmg.com/vlog. If you like our content, feel free to share it with friends and family. And don’t forget to smash that subscribe button!
1.FactSet Research Systems. (n.d.). S&P 500 (Interactive Charts). Retrieved September 23, 2022, from FactSet Database.
2.Bureau of Labor Statistics. US Department of Labor. News Release September 13, 2022 “Consumer Price Index – August 2022”. Retrieved from www.bls.gov/cpi
3.FactSet Research Systems. (n.d.). WTI spot prices (Interactive Charts). Retrieved September 23, 2022, from FactSet Database.
4.FactSet Research Systems. (n.d.). Gasoline RBOB futures (Interactive Charts). Retrieved September 23, 2022, from FactSet Database.
5.FactSet Research Systems. (n.d.). Producer price index Y/Y% (Interactive Charts). Retrieved September 23, 2022, from FactSet Database.
6.FactSet Research Systems. (n.d.). S&P 500 prices and NTM EPS (Interactive Charts). Retrieved September 23, 2022, from FactSet Database.
7.FactSet Research Systems. (n.d.). S&P 500 (Interactive Charts). Retrieved September 23, 2022, from FactSet Database.
Signature Wealth Management Group is registered as an investment adviser with the SEC. Signature Wealth only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements.
Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change.
Information contained herein does not involve the rendering of personalized investment advice, but is limited to the dissemination of general information.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them. Changes in the CPI are used to assess price changes associated with the cost of living.
The federal funds rate refers to the target interest rate set by the Federal Open Market Committee (FOMC). This target is the rate at which commercial banks borrow and lend their excess reserves to each other overnight.
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.
Past performance does not guarantee future results. Consult your financial professional before making any investment decision.
Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. The use of words such as “will”, “may”, “could”, “should”, and “would”, as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements.
Information is not an offer to buy or sell, or a solicitation of any offer to buy or sell the securities mentioned herein.
The S&P U.S. Style Indices measure the performance of U.S. equities fully or partially categorized as either growth or value stocks, as determined by Style Scores for each security. The Style series is weighted by float-adjusted market capitalization (FMC), and the Pure Style index series is weighted by Style Score subject to the rules described in Index Construction.
All information presented prior to an index’s Launch Date is hypothetical (back-tested), not actual performance. The Index returns shown do not represent the results of actual trading of investable assets/securities. S&P Dow Jones Indices LLC maintains the Index and calculates the Index levels and performance shown or discussed, but does not manage actual assets. Please refer to the methodology paper for the Index, available at www.spdji.com for more details about the index, including the manner in which it is rebalanced, the timing of such rebalancing, criteria for additions and deletions, as well as all index calculations.