Market Insights: 8-24-22 Stocks Have Warmer Week as Inflation Cools
Opinion
The markets have again begun sending mixed messages that are difficult to take action on:
• Technical analysis indicates that we have begun the next bull market stage.
• Fundamental analysis indicates we are still in a bear market condition.
• Economic analysis indicates we are still in a problematic bearish condition.
• Headlines & Expectations are all staring at bearish & complex issues that economies around the world are facing
At present, we are watching the show but not betting on the outcome yet, meaning we are still holding our course but have made a minor shift to our equity exposure as a nod to the technical aspects while remaining aligned to the remainder of the conditional data.
Having returned from Covid for the 3rd time in 2 years, I can honestly say this exposure was the most difficult and exhausted I have been in years. Stamina is still a struggle but is getting better by the day. Those of you that have been flexible these past couple of weeks, I appreciate it.
Till we speak again, enjoy your week!
Jon
General Market Commentary
An improving inflation outlook buoyed investors’ spirits last week, helping lift stocks to solid gains.
The Dow Jones Industrial Average advanced 2.92%, while the Standard & Poor’s 500 rose 3.26%. The Nasdaq Composite index added 3.08% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, gained 2.39%.1,2,3
Lower Inflation Spurs Buying
Stock prices surged mid-week when the U.S. Bureau of Labor Statistics released a better-than-expected Consumer Price Index (CPI) number, with buying momentum building throughout the trading session.
Gains were significant across the board, with technology and small-cap companies leading the market higher. The mid-week rally sent the S&P 500 to its highest level since May and the Nasdaq to its highest level since April. Bond yields fell on expectations that the Fed's pressure to hike rates further might ease. After pausing on Thursday, stocks again ripped higher on Friday, aided, in part, by a report indicating improving consumer sentiment.4
Inflation Cools
The Consumer Price Index in July was softer than expected, with prices unchanged from the previous month thanks to a 4.6% decline in energy prices and a 7.7% drop in gasoline.4
Despite the encouraging results, the CPI report still evidenced upward price pressure. The year-over-year inflation rate remained at 8.5%, while the core CPI (excluding food and energy) came in at 5.9%. Among the index components seeing substantial price increases were food (+10.9% from 12 months ago) and shelter (+5.7%). Producer prices fell 0.5% in July, suggesting that future consumer price increases may continue to moderate.5,6
This Week: Key Economic Data
Tuesday: Industrial Production. Housing Starts.
Wednesday: Retail Sales. Federal Open Market Committee (FOMC) Minutes.
Thursday: Jobless Claims. Existing Home Sales. Index of Leading Economic Indicators.
Source: Econoday, August 12, 2022 The Econoday economic calendar lists upcoming U.S. financial data releases (including vital economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
This Week: Companies Reporting Earnings
Tuesday: Walmart, Inc. (WMT), The Home Depot, Inc. (HD).
Wednesday: Cisco Systems, Inc. (CSCO), Target Corporation (TGT), Lowe’s Companies, Inc. (LOW), The TJX Companies, Inc. (TJX).
Thursday: Applied Materials, Inc. (AMAT), NetEase, Inc. (NTES).
Friday: Deere & Company (DE).
Source: Zacks, August 12, 2022 The companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.
"You can’t destroy knowledge. You can stamp it under, burn it, and forbid it to be, but somewhere it will survive."
– Leigh Brackett
Help Get Your Federal Withholding Correct With This Tool From the IRS
The IRS has a handy tool called the IRS Tax Withholding Estimator that can help taxpayers better understand their withholding. It’s essential to examine your federal withholding periodically to ensure you are comfortable with the amount of tax withheld.
Checking your withholding status may be a good idea to consider if you have experienced a change that may affect your tax status, such as:
• Going through a marriage or divorce
• Having or adopting a child
• Purchasing a new home
• Working two or more jobs at the same time
• Only working part of the year
• Claiming credits such as the child tax credit
* This information is not intended to substitute for specific, individualized tax advice. We suggest you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov7
What is Sleep Hygiene?
We all want a better night’s sleep, and your sleep hygiene routine might impact the amount and quality of shut-eye you get. Sleep hygiene refers to your habits to get a good night’s sleep. The better your habits, the better your chances are of improving your sleep.
Here are some good sleep hygiene tips:
• Be consistent with your sleeping and waking times, even on weekends!
• Make sure your bedroom is dark, quiet, and of a comfortable temperature.
• Invest in blackout curtains or a white noise machine to drown out light and sound.
• Avoid electronic devices at least an hour before bed, including phones and TV.
• If your appliances have a “night” mode, switch this on a few hours before bed to reduce blue light.
• Make sure to get enough exercise during the day, which may help you fall asleep faster.
Tip adapted from the Centers for Disease Control and Prevention8.
Trains travel from one town to another all day, always on the same track, going nonstop and at the same speed. The noon train took 80 minutes to complete the trip, but the 4 PM train took an hour and 20 minutes. Why?
Last week’s riddle: Just two U.S. states have capital cities whose names include the full name of the state. What states are they? Riddle answer: Riddle answer: Indiana (Indianapolis) and Oklahoma (Oklahoma City).
Torres del Paine National Park, Magallanes Region, Chile
Footnotes and Sources
1. The Wall Street Journal, August 12, 2022
2. The Wall Street Journal, August 12, 2022
3. The Wall Street Journal, August 12, 2022
4. CNBC, August 10, 2022
5. CNBC, August 10, 2022
6. CNBC, August 11, 2022
7. IRS.gov, April 28, 2022
8. CDC.gov, May 26, 2022
Investing involves risks, and investment decisions should be based on your goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.
The market indexes discussed are unmanaged and generally considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.
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