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December 16, 2022

Stock Market Update

Gayle Sprute

Vice President
Senior Portfolio Manager


It was tough sledding for stocks this week. The market was in a wishing, hoping, praying phase at the start of the week. Overall though, things didn’t pan out as hoped for. The march lower by equity indices provided evidence of the market’s disappointment.

Early in the week, stocks moved higher on hopes that the Federal Reserve (Fed) would be more dovish in its comments after its Federal Open Market Policy (FOMC) meeting on Wednesday.

On Tuesday, the much anticipated November Consumer Price Index (CPI) came in softer than consensus on both headline and core measures. The headline CPI print was up 7.1% year/year, which was the lowest since December, 2021. The release noted continued increases in food, offset by energy decreases. Shelter increases remained high, but decreases were seen in medical care, airline costs and used vehicles. The report was largely consistent with expectations for dampened core goods inflation, along with sticky core services inflation.

The market had prepared for and was awaiting the all-important last Federal Open Market Committee (FOMC) meeting of the year, which concluded on Wednesday. As expected, the Fed downshifted and increased rates by 50 basis points. In the post-meeting press conference, Fed Chair Powell reiterated that monetary policy still is not sufficiently restrictive, but noted that policy decisions will be made on meeting-by-meeting basis, dependent on incoming data. Although there was nothing particularly surprising about the takeaways, the market remained focused on the “higher for longer” monetary policy theme—and the potential for a policy error. Stocks moved lower in the aftermath of the meeting as investors digested the information.

Late in the week, the November retail sales data did not give investors anything to cheer about. November sales declined by 0.6% month/month versus an expected 0.2% drop. The decline brought questions about whether consumer spending will hold up in the face of slowing economic activity and rising interest rate and debt carry costs.

Index

Current Week

Month of Dec.

YTD

Dow Jones Industrial Avg.

-0.81%

-3.93%

-6.71%

S&P 500

-0.95%

-4.44%

-16.96%

Nasdaq

-1.75%

-5.70%

-30.34%

MSCI EAFE

-0.87%

0.95%

-13.29%

Russell Mid Cap

-0.69%

-4.33%

-16.38%

Russell 2000

-1.19%

-5.86%

-19.90%

As of:

12/15/2022
 
 
 
 
 
 
Updates to the Equities Buy List:
 

Company Name

News Event

Microsoft Corp.

(MSFT)

 

Patrick Dawson

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Fixed Income Update


Brian Brill

Vice President
Senior Portfolio Manager
Fixed income investors were treated to a fresh look at U.S. inflation data and updated economic projections from the Federal Reserve this week.

On Tuesday, the consumer price index was reported to have risen 7.1% year-over-year - lower than the 7.3% that was expected - and the lowest CPI print in 2022. This inspired hope that the Federal Reserve may begin to slow the pace of rate increases with the ultimate peak in rates ultimately being lower than markets had previously expected. Prior to the release of CPI, Fed Funds Futures markets expected the Fed to raise rates to approximately 5.00% in early 2023, after CPI was reported that expectation fell to about 4.75%.

On Wednesday, the Federal Open Market Committee (FOMC) concluded their two-day policy meeting and as expected, raised the Fed’s benchmark interest rate another 50 basis points (0.50%). The statement released by the committee also confirmed a downshift in interest-rate hikes that was widely expected but also indicated that the Fed expects to raise rates more than investors anticipated. As noted above, the market was expecting the Fed to raise rates to about 4.75% in early 2023, the Fed’s own projections show rates ending 2023 at 5.125% - meaning they could raise rates to that level and keep them there, or perhaps above that level and then reduce rates later in 2023. The 50-basis point increase comes after 4 consecutive 75-basis point increases by the Fed, and the 425 basis points of cumulative rate hikes in 2022 are the most in a calendar year since 1980.

Fed Chair Jerome Powell pushed back on the market’s expectations for a less aggressive Fed in the near-term, reminding investors that they (the Fed) “will stay the course until the job is done”. With CPI at 7.1% and the Fed’s preferred measure of inflation Personal Consumption Expenditures (PCE) at 6.0%, they Fed believes that they still have a lot of work to do to bring inflation towards their 2.0% target. The fixed income market remains skeptical that A) the Fed will raise rates to the levels they think and B) if they do so, they won’t cause harm to the U.S. economy. Despite the hawkish message delivered by the Fed, Treasury yields are lower on the week.

​

December 16, 2022

Index

Current

Last Week

Wk Chg

Last Year

Yr Chg

Tax-exempt MMF

2.60%

1.94%

.66%

.01%

2.59%

Taxable MMF

3.92%

3.87%

.05%

.01%

3.91%

2-Year Treasury

4.19%

4.35%

-.16%

.62%

3.57%

5-Year Treasury

3.62%

3.77%

-.15%

1.17%

2.46%

10-Year Treasury

3.48%

3.58%

-.10%

1.41%

2.07%

30-Year Treasury

3.54%

3.56%

-.02%

1.85%

1.69%

5-Year Exp. Inflation

2.19%

2.37%

-.18%

2.74%

-.55%

2-Year Corporate*

4.64%

4.71%

-.07%

.87%

3.77%

5-Year Corporate*

4.51%

4.64%

-.13%

1.64%

2.87%

10-Year Corporate*

4.68%

4.81%

-.13%

2.28%

2.40%

30-Year Corporate*

4.80%

4.88%

-.08%

2.92%

1.88%

2-Year Municipal**

2.55%

2.51%

.04%

.31%

2.24%

5-Year Municipal**

2.51%

2.52%

-.01%

.70%

1.81%

10-Year Municipal**

2.66%

2.67%

-.02%

1.14%

1.51%

30-Year Municipal**

3.76%

3.79%

-.03%

1.63%

2.13%

10-Year German Govt Bond

2.15%

1.92%

.22%

-.36%

2.50%

10-Year U.K. Govt Bond

3.32%

3.17%

.15%

.75%

2.57%

10-Year Japanese Govt Bond

.24%

.24%

.01%

.04%

.21%

10-Year Spanish Govt Bond

3.23%

2.94%

.29%

.38%

2.85%

10-Year Italian Govt Bond

4.28%

3.82%

.46%

.97%

3.31%

Fed Funds

4.50%

4.00%

.50%

.25%

4.25%

Prime Rate

7.50%

7.00%

.50%

3.25%

4.25%

Dollar***

$104.68

$104.81

-$0.13

$96.04

$8.63

CRB

$271.38

$266.28

$5.10

$227.24

$44.14

Gold

$1,790.00

$1,798.10

-$8.10

$1,796.60

-$6.60

Crude Oil

$74.27

$71.02

$3.25

$72.38

$1.89

Unleaded Gasoline****

$2.13

$2.06

$0.08

$1.95

$0.18

Note:  Municipal yields are as of the previous business day.

* Composite A

** General Obligation AA+

*** Int'l value of the U.S. dollar (Avg. exchange rate between the dollar and 6 major world 

    currencies).

**** Futures price per gallon