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Lately, there’s been a lot of talk about inflation and monetary policy. Decoding information from the media and financial reports is no easy task. That’s why we’re here to break down some of the complex information for you.
In this month’s video, Eagle Wealth practicing partner, Mat Hunnicutt, CFP®, analyzes how the Fed is approaching policy change and how current market trends are contributing to the recent volatility. Check out the video here.
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Run Time: 7 minutes, 43 seconds
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As always, please reach out if you have questions about the video or about your personal financial situation. We’re here to help.
Until next week,
Your Eagle Wealth Team
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How well do you remember 1981? Harrison Ford had his first bow as Indiana Jones in Raiders of the Lost Ark. Frogger and Donkey Kong were all the rage at video arcades. Bob Ross left the Air Force and took up painting. On top of that, we had the largest Social Security cost-of-living adjustment (COLA) on record: 11.2%.
This year’s COLA increase won’t reach that high, but the Senior Citizens League anticipated it to be as much as 8.7%. As it turns out, they were right on the nose. This tops last year’s 5.9% increase.1
What this increase means for those collecting Social Security benefits is additional help battling inflation. The average Social Security retiree benefit will increase $146 per month, to $1,827 in 2023, from $1,681 in 2022.1
Why is it happening now? Congress has COLA increases pegged to rising inflation. While there’s been a great deal of talk about inflation this year, the increase depends on the much-anticipated official numbers: the third quarter’s Consumer Price Index (CPI) is measured against the CPI of the previous year, and the COLA is calculated from that.
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The Week on Wall Street
A positive start to a new earnings season and late-week hopes for a near-term easing in Fed rate hikes lifted investors’ spirits and powered stocks to gains for the week.
The Dow Jones Industrial Average jumped 4.89%, while the Standard & Poor’s 500 advanced 4.74%. The Nasdaq Composite index added 5.22% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, gained 1.66%.1,2,3
Earnings, Fed Spark Rally
The stock market narrative shifted last week from Fed interest rate hikes (a persistent drag on investor sentiment) to corporate earnings, which boosted investor enthusiasm with better-than-expected results. Stocks surged in the first two days of trading on the strength of positive earnings surprises, aided by a modest pullback in bond yields and news that the U.K. was scrapping its tax cut plans.
Mid-week, stocks surrendered some gains on a stronger U.S. dollar and rising bond yields. But on Friday, comments by a Fed official that hinted at a possible relaxation in Fed rate hikes sent stocks soaring to close out a good week.
Better Than Expected
Investors were approaching the new earnings season with a fair amount of trepidation amid an environment of higher interest rates and a slowing economy. The concern has been that poor earnings may drag stock prices lower from current levels.
Early earnings results have provided investors with mostly positive surprises. With 88 companies comprising the S&P 500 index reporting, 75% reported profits above analysts’ expectations, well above the 66% long-term average.4
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THE WEEK AHEAD
KEY ECONOMIC DATA
Monday: Purchasing Managers’ Index (PMI) Composite.
Tuesday: Consumer Confidence.
Wednesday: New Home Sales.
Thursday: Jobless Claims. Durable Goods Sales. Gross Domestic Product (GDP).
Source: Econoday, October 21, 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.
COMPANIES REPORTING EARNINGS
Tuesday: Microsoft Corporation (MSFT), General Electric Company (GE), Visa, Inc. (V), Alphabet, Inc. (GOOGL), General Motors Company (GM), The CocaCola Company (KO), Archer Daniels Midland Company (ADM), 3M Company (MMM), Texas Instruments, Inc. (TXN), United Parcel Service, Inc. (UPS), KimberlyClark Corporation (KMB).
Wednesday: The Boeing Company (BA), Ford Motor Company (F), Bristol Myers Squibb Company (BMY), ServiceNow, Inc. (NOW), General Dynamics Corporation (GD), Norfolk Southern Corporation (NSC).
Thursday: Apple, Inc. (AAPL), Amazon.com, Inc. (AMZN), Intel Corporation (INTC), Mastercard, Inc. (MA), Caterpillar, Inc. (CAT), Merck & Co., Inc. (MRK), McDonald’s Corporation (MCD), Northrop Grumman Corporation (NOC), Comcast Corporation (CMCSA), Southwest Airlines Company (LUV).
Friday: AbbVie, Inc. (ABBV), Exxon Mobil Corporation (XOM), Chevron Corporations (CVX), ColgatePalmolive Company (CL).
Source: Zacks, October 21, 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.
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Any companies mentioned are for informational purposes only, and this should not be considered a solicitation for the purchase or sale of their securities. Any investment should be consistent with your objectives, time frame, and risk tolerance.. Th
Disclosures and Footnotes
1. The Wall Street Journal, October 21, 2022
2. The Wall Street Journal, October 21, 2022
3. The Wall Street Journal, October 21, 2022
4. Refinitiv, October 20, 2022
5. CNBC.com, October 13, 2022
e Wall Street Journal, October 21, 2022
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.
This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG is not affiliated with the named representative, financial professional, Registered Investment Advisor, Broker-Dealer, nor state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security. Copyright 2022 FMG Suite.
