It’s hard to see the chaos in markets ending
soon. This week should bring relatively little in the way of market-moving
news—the personal consumption expenditures price index will be the
economic-data highlight this Friday, along with earnings from Nike
and Micron Technology, both on
Thursday—before a six-week period with perhaps too much news.
The first two weeks of October will bring
September jobs and inflation reports; then third-quarter earnings season will
ramp up. Management commentary on the future will be key. The first week of
November includes a Fed meeting and the October employment numbers; then the
midterm elections and October inflation figures arrive the following week.
Making it all the more difficult: The futures
market is still fighting the Federal Reserve, pricing in a
peak federal-funds rate in early 2023 and cuts by the end of that year. That’s
in contrast to the officials’ stated plans to pause and wait for tighter policy
to have an effect. In other words, there’s room for market pricing to get
incrementally more hawkish and for yields to rise further, hurting stocks.
A drop below the S&P 500’s June low of
3,667 points today means the index has broken through a key support
level. Several European and Asian indexes broke through the bottom of
their 2022 trading ranges last week.
It’s likely to be a bumpy road: October
historically has seen the most 1% one-day gains or losses in the S&P 500 of
any month, according to Bespoke Investment Group,
followed by November.
December could be better. It’s a seasonally
strong month for the market, and if monthly inflation readings come down by the
end of the year, there shouldn’t be any more hawkish surprises from the Fed.
Stocks also tend to do worse the year before a recession than they do once the downturn
arrives, which means the market could start rallying, even as the economic pain
ramps up.
Don’t look too far ahead, however. We have to get through what’s coming first.
No comments:
Post a Comment