Equities Fall on Inflation Reading
Equities tumbled last week as higher-than-expected inflationary data spooked markets. Global equities (represented by the MSCI All Country World Index) were down -4.04%, and domestic stocks (represented by the S&P 500 Index) were down -4.73%.
Consumer Price Index
The US Consumer Price Index released Tuesday showed an unexpected rise in prices for August from the previous month of 0.1%. Year-over-year, CPI rose 8.3% versus consensus estimates of 8.1%. Core CPI (excluding food and energy) also rose more than expected with an annual increase of 6.3% with medical care and housing costs increasing. The report led to the S&P 500’s worst one-day drop on Tuesday since June 2020.
Treasure Yield Rising
The 10-year US Treasury yield rose to 3.45% on Friday, up from 3.13% at the end of August. The Bloomberg US Aggregate Bond Index was down -0.93% last week and down -12.38% year-to-date.
The University of Michigan’s Consumer Sentiment preliminary reading for September hit its highest point since May 2022. Falling gas prices seemed to ease consumers’ fears as consumer inflation expectations fell near the lowest levels in a year. The below inflation expectations come from the New York Fed’s Survey of Consumer Expectations.
The US Federal Reserve’s next FOMC meeting will be held this week. Last week’s CPI reading increased expectations of at least a 0.75% rate hike and increased uncertainty around the future path of the Fed. Along with the Fed meeting, data on the housing market for August will be released this week.
I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.
S&P 500: The Standard & Poor’s 500 Composite Stock Price Index is a capitalization-weighted index of 500 stocks intended to be a representative sample of leading companies in leading industries within the U.S. economy. Stocks in the Index are chosen for market size, liquidity, and industry group representation.
Russell 2000: The Russell 2000® Index is a capitalization-weighted index designed to measure the performance of the 2,000 smallest publicly traded U.S. companies based on in market capitalization. The Index is a subset of the larger Russell 3000® Index.
MSCI All Country World Index: The MSCI ACWI captures large and mid-cap representation across 23 Developed Markets (DM) and 24 Emerging Markets
(EM) countries. With 2,937 constituents, the index covers approximately 85% of the global investable equity opportunity set.
GDP: Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period.
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