Market Commentary — September 26, 2022

A hawkish Fed, led by head hawk Jerome Powell, sent stocks into a brutal sell-off, and bond yields shot up sharply higher. The Dow Jones Industrial Average and S&P 400 Midcap Index fell to new intraday lows not seen since late 2020. The S&P 500 Index, small-cap Russell 2000 Index, and Nasdaq Composite managed to stay slightly above their bottoms hit in mid-June of 2022. The technology-heavy Nasdaq Composite Index fared the worst for the second consecutive week.

The Cboe Volatility Index (VIX), Wall Street’s so-called fear gauge index, stayed below its spring highs levels but rose sharply, ending the week just below 30 (20 is the historical average).

While equities and commodities like oil took a tumble on global recession fears, there were also big moves in the bond market, where we saw the 2-year treasury hit 4.1%, its highest level since October 2007, and the 10-year was at 3.8%, its highest point since November 2008. While there are signs that higher interest rates are slowing some segments of the economy, like real estate, it does not seem to be making much of a dent elsewhere.

Manufacturing activity continued to expand and even accelerated a bit (51.8 versus 51.5, with levels above 50 indicating expansion) from August’s reading, while services sector activity continued to contract, but at a much more modest pace (49.2 versus 43.7). Weekly jobless claims, reported Thursday, rose a bit to 213,000 but would have been flat if the previous week’s number had not been revised down. The four-week moving claims average fell to its lowest point in three months.

Basically, the Fed seems hell-bent on forcing the U.S. economy into recession as the cure for inflation. But investors, market experts, and other economists are not loving that. Look at this interview with Wharton Professor Jeremy Siegel who says the Fed has made the most significant policy mistake in its 110-year history. The reason the Fed is over-compensating now is to overcome the excesses of the last two years, but they are making things worse.

Somehow, my comments to a Bloomberg reporter ended up as the title for an article in ZeroHedge “Maybe 4-5% Inflation Is The New Normal”. You can read the article and my comments here.

The big news in ETF land is that all the single stock ETF filings have been pulled, likely on the advice of the SEC who “no likey”, especially during this market s#*&-storm.

There’s a saying on Wall Street, that markets don’t bottom on Fridays, so we shall see what Monday and the coming week will bring this last week of the quarter.

Jane Edmondson
CEO and Co-Founder

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