Medicare Agent News: A September to Forget

Tuesday, October 11, 2022

A September to Forget

By Connor Smith | Friday, September 30

Another Rough Quarter. U.S. stocks wrapped up September on a low note by relinquishing early gains today after the Federal Reserve's preferred inflation gauge came in hotter than expected.

The Dow Jones Industrial Average fell 1.7% on the day, extending its September decline to 8.8%. It's the Dow's worst month since the U.S. locked down for the pandemic in March 2020, according to Dow Jones Market Data. For the third quarter, the Dow fell 6.7%, its third-straight quarterly decline. It's down about 21% year to date, and set a 52-week low today.

The S&P 500 fareed similarly with a 1.5% decline today. It also set a 52-week low to cap off its worst month since March 2020. The Nasdaq Composite also fell 1.5% on the day, and 10.5% on the month. The tech-heavy index closed at its lowest level since July 29, 2020.

The core personal consumption expenditures price index, or PCE, rose 0.6% in August, ahead of economists' expectations for 0.5%, according to FactSet. Louis Navellier, founder of Navellier & Associates, writes that the figure shows inflation is becoming more structural.

"That means the Fed will remain hell-bent on killing inflation," he writes. "And the best way to do that is to increase rates, kill the housing market, and get rental costs down. The PCE doesn't have housing and rents as a big component as the CPI does, so the fact that it is rising is a warning sign."

Barron's Megan Cassella writes that Federal Reserve Vice Chair Lael Brainard reiterated that the central bank is committed to reining in inflation and will not pull back on its tightening path.

Brainard’s remarks came at the close of a wild week on Wall Street, with major stock indexes on track to end the month with their worst losing streak in 20 years. The market volatility was driven in part by the Bank of England’s emergency move to buy U.K. government bonds, which sparked hope among some investors that the Federal Reserve could be closer to its terminal rate than had been previously expected.

But Brainard’s speech suggests that the Fed remains focused on its own inflation fight in spite of rising instability around the world, and that the central bank has not changed its position that rates will need to stay high for “some time” in order to cool the economy. She mentioned that while some interest-sensitive sectors like housing are already adjusting to tighter policies, the effects in other areas, including in consumer spending on services, are occurring with a lag. The Fed has already raised interest rates by 300 basis points so far this year.

Stocks were actually on track to rise on the day until gains reversed around noon E.T. Barron's Jacob Sonenshine and Jack Denton point out other market factors could be at play.

It’s the end of the third quarter, and some equity managers might need to get rid of some shares so their portfolios don’t look too exposed to a risky stock market. To be sure, institutional fund managers have already sold a lot this year, raising more cash, but there could be a bit more selling, or “window dressing” Friday.

“End of the quarter re-balancing will play a significant role in how the market ends a particularly volatile week,” wrote Quincy Krosby, chief global strategist for LPL Financial.

If that's the cause, the selloff could take a break in October. There is some good news: Gary Alexander, senior writer at Navellier & Associates, points out that October has been the best-performing fourth-quarter month in eight of the last 15 mid-term election cycles. After a month like this, the major indexes could use a spooky season rally.

Watch our weekly TV show on Fox Business Saturday or Sunday at 10 a.m. or 11:30 a.m. ET. This week, insights from Charles Schwab's Liz Ann Sonders, and investing ideas for volatile times.