The markets experienced another volatile quarter rebounding off the market lows in June only to retreat to new lows at the quarter end. The market currently prices in a hard landing after Powell noted in his last speech that he will raise rates to fight inflation ‘until the job is done’. Many think they are much too aggressive. The Federal Reserve hiked interest rates by 75 basis points for a third consecutive time pushing the range to 3.0.-3.25%, with the dot plot showing rates ending above 4.0% by the end of the year, a level not seen since 2007. Inflation started to come down but is still elevated at a Consumer Price Index reading of 8.3% in August, a level not seen since the early 80s. Commodities have begun to move lower as fear of a recession spreads and the strong summer demand for oil/gas slows into fall. However, major concerns still exist in the commodities market as Russia has stopped supplying gas to Europe and European energy reserves sit at 80% capacity ahead of winter. China continues to be a wildcard ahead of the Communist Party Congress in mid-October where Xi Jinping is expected to secure an historic third term. Many speculate that China may ease its strict Zero-COVID policy following the meeting. The Party could look to boost economic activity which has been hurt by continual lockdowns and a property market crisis that continues to worsen. The Chinese government’s growth targets of 5.5% for 2022 no longer looks realistic.
During the September quarter, the Nasdaq Composite fell 3.9% beating the S&P 500’S return of -4.9% and the Dow Jones Industrial Average return of -6.2%. Two out of the eleven sectors in the S&P 500 posted positive gains during the period with Consumer Discretionary showing a strong rebound and a return of 4.4% followed by Energy’s gain of 2.2%. Telecommunications was the worst performer over the period declining 12.7%. All market caps performed poorly with the small-caps marginally outperforming the Midcap and large-caps. Specifically, the Russell 2000 declined 2.2% compared to the Russell Mid-Cap Index fall of 3.4% and the Russell 1000 Index, which lost 4.6% over the same period. Growth stocks finally outperformed Value stocks, but both declined over the period with the Russell 1000 Growth Index declining 3.6% compared to the 5.6% decline of the Russell 1000 Value Index. Bonds continued to fare poorly during the period, with Barclays Long-Term Treasuries falling 10.1% while US Corporates did better with the Barclays Aggregate falling 4.8%. The US Dollar continued to move higher gaining 7.1% over the quarter, and up 19.0% YoY. Energy prices moved lower with West Texas Intermediate (WTI) crude declining 24.8% during the period. Gold lost 8.5% during the quarter while Bitcoin gained 3.7%, although it is still down 55.3% for the year.
All data sourced by Bloomberg.
The Consumer Price Index (CPI) measures the change in prices paid by consumers for goods and services. The NASDAQ Composite Index is a market capitalization-weighted index that is designed to represent the performance of NASDAQ securities and it includes over 3,000 stocks. The S&P 500 Index is a market capitalization-weighted index of 500 widely held common stocks. Investors cannot invest directly in an index and unmanaged index returns do not reflect any fees, expenses or sales charges. The Dow Jones Industrial Average (DJIA) is an unmanaged index composed of 30 blue-chip stocks, each with annual sales exceeding $7 billion. The DJIA is price-weighted, reflects large-cap companies representative of U.S. industry, and historically has moved in tandem with other major market indexes, such as the S&P 500. The Russell® 2000 Index is a small-cap stock market index that makes up the smallest 2,000 stocks in the Russell 3000 Index. The Russell Midcap® Index, an unmanaged index, measures the performance of the 800 smallest companies in the Russell 1000 Index. The Russell 1000® Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. The Russell 1000 Growth® Index measures the performance of those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Value® Index measures the performance of those Russell 1000 Index companies with lower price-to-book ratios and lower forecasted growth values. The Barclays Long-Term Treasury Index includes publicly issued U.S. Treasury securities that have a remaining maturity of 10 or more years, are rated investment grade, and have $250 million or more of outstanding face value. An investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges. The Barclays U.S. Aggregate Bond Index tracks the daily price, coupon, pay-downs, and total return performance of fixed-rate, publicly placed, dollar-denominated, and nonconvertible investment grade debt issues with at least $250 million par amount outstanding and with at least one year to final maturity.
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