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Market Recap – September 26, 2022

Keel Point
September 26, 2022
Market Recap

The Fed is resolute in bringing inflation back to its annual target of 2% and announced a 75 bp increase in Fed Funds last week and signaled another 75 bp increase in November with a 50 bp increase in December. 

  • Fed Chair Powell in last Wednesday’s post-FOMC meeting press conference said: “we have got to get inflation behind us. I wish there were a painless way to do that.  There isn’t.”
  • The Fed’s Volcker-style “inflation-slayer” rhetoric and actions are geared to drive inflation back to the Fed’s 2% target and provide more moderate interest rates sometime in 2023 (Capital Economics) or 2024 (FOMC member dot-plot).
  • Flat or possibly even negative GDP growth in the first half of 2023, accompanied by rising unemployment, will accelerate the disinflationary pressures starting to show up in energy, food and even housing.

 

Earnings growth estimates are falling more rapidly for the second half of 2022 and full-year 2023. 

  • Last week earning estimates for 2022-Q3 fell to +1.2% from +3.7% (FactSet) just weeks before, with the biggest declines coming in Consumer Discretionary, Consumer Staples, Technology and Retail.
  • Rising interest rates, inflation, a strong US dollar and likely flat or negative GDP growth in 2023 all are challenging more positive earnings growth.
  • Historically, stock markets factor-in slower earnings growth and the other macro factors quickly, so stock prices can begin to rebound when sentiment about earnings and the economy are still low or falling.

Disclosure: Securities offered through Keel Point Capital, LLC, Member FINRA and SPIC. Brokerage and Investment advisory Services are offered under the Keel Point brand. Investment Advisory services offered by Keel Point, LLC an affiliate of Keel Point Capital, LLC. While reasonable efforts have been made to provide data from sources considered to be reliable, no guarantee of accuracy is given. Keel Point does not give tax, accounting, regulatory, or legal advice to its clients.

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