Private Client Group

September 26th, 2022

Fed’s Rate Hikes, Softening Housing Market, Retail Sales Rise

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In today’s Steady Investor, we dive into key factors that we believe are currently impacting the market and what could be next for the markets such as:

Fed Raises Rates By 75 Basis Points and Increases Forecast for the Year – As expected, every member of the Federal Open Market Committee (FOMC) voted to raise the federal-funds rate by 75 basis points, to a range between 3% and 3.25%. The last time rates were this high was in 2008, during the Global Financial Crisis. Even though this rate increase was largely expected, equity markets sold off sharply as investors digested the central bank’s new projections for interest rates by the end of the year and into 2023. Fed minutes showed a 4.4% median projection by FOMC officials for fed funds by the end of the year, which marked a substantial increase from the 3.4% forecast that existed in June. What was perhaps more meaningful to equity markets and short-term Treasury yields, however, was that the 4.4% projection was 25 basis points higher than traders were expecting, which registered as a negative surprise. Markets do not like negative surprises. With rates currently at 3% to 3.25% and projected to reach 4.4%, the implication is that the Federal Reserve will implement sizable rate increases at their November and December meetings, assuming that inflation data remains elevated throughout this time. There are two key pieces of economic data that have investors worried that inflation may not meaningfully abate in the near future: rapidly rising wages and rising prices outside of food and energy, signaling that inflation is broad-based.1

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Are We Headed for a Recession or Already in One? Here’s How to Navigate Through It!

Back in June, the U.S. economy technically entered a recession (two consecutive quarters of negative GDP growth). But in many ways, this so-called recession is anything but typical. But will that be the case for the rest of the year?

To better navigate through market volatility, it’s important to be prepared for both the good and bad. In this report, we look take a look at:

If you have $500,000 or more to invest and want to learn more, download your guide today!

Download Our Just Released, “September Market Strategy Guide”2

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The Downstream Effects of a Softening Housing Market – The housing market in the U.S. continues to show signs of cooling off, with home sales falling for the seventh straight month. On the heels of Federal Reserve rate increases have been rising U.S. Treasury bond yields and mortgage rates, which recently crossed 6% for the first time since 2008. Worth noting, however, is that the housing market is softening from a relatively strong position, as the pandemic ushered in a housing boom that saw sales and prices soar to record levels. Even still, as the housing market cools off, there could be rippling effects throughout the economy, particularly for sales and revenues of companies that sell products home buyers need. Think furniture, washing machines, light fixtures, and other goods and even services that new homeowners need. The effects are already starting to be felt: according to the Commerce Department, furniture and home-furnishing store sales fell by 1.6% in August, and new layoffs have been reported. At electronics and appliance stores, sales have fallen by 5.7%.3

Economic Data Roundup Points to Slowing – But Not Imploding – U.S. Economy – Economic data in the U.S. has been tapering off, but has not shown signs of falling off a cliff. At least not yet. Retail sales in August were relatively good, rising 0.3% in August – a 0.2% faster pace than inflation’s increase over the same period. However, looking more closely into the numbers shows that a bulk of the sales increase came from spending at auto dealerships, which may reflect higher prices for cars. Stripping out auto sales, retail sales were down 0.3%. Industrial production was also off by 0.2% in August, though manufacturing output held its own and rose 0.1%. Finally, the jobs market continues to be the asterisk in an otherwise weakening economic landscape, with new claims for unemployment falling for the fifth straight week and the unemployment rate steady at a historically low 3.6%.4

Recession Fears? Prepare Your Investments for the Remainder of 2022 – Are you prepared to navigate through a recession?  

In our just-released September Market Strategy Report, we take a look at the key factors that are influencing the economy and markets as the rest of the year unfolds. We also take a look at the earnings picture so far, and:

If you have $500,000 or more to invest and want to learn more, click on the link below to get your free report today!

Disclosure

1 Wall Street Journal. September 21, 2022. https://www.wsj.com/articles/u-s-treasury-yields-steady-ahead-of-fed-decision-11663770829

2 Zacks Investment Management reserves the right to amend the terms or rescind the free-Market Strategy Report offer at any time and for any reason at its discretion.

3 Wall Street Journal. September 18, 2022. https://www.wsj.com/articles/home-goods-retailers-jolted-by-slowdown-in-housing-market-11663493404?mod=djemRTE_h

4 Wall Street Journal. September 15, 2022. https://www.wsj.com/articles/us-economy-retail-sales-august-2022-11663185901?mod=djemRTE_h

5 Zacks Investment Management reserves the right to amend the terms or rescind the free-Market Strategy Report offer at any time and for any reason at its discretion.

DISCLOSURE

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

Certain economic and market information contained herein has been obtained from published sources prepared by other parties. Zacks Investment Management does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Zacks Investment Management considers to be reasonable. Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor’s. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor. An investor cannot invest directly in an index.
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