Private Client Group

November 14th, 2022

Inflation News Triggers Rally, Midterms Still Undecided, China Slowdown

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With the recent news and headlines surrounding the current state of the market, we are taking a deeper dive into key factors that we believe investors should keep an eye on, such as:

Stocks and Bonds Rally on Better-Than-Expected Inflation Data – The stock and bond market surged on Thursday as inflation data showed signs of falling further from its June peak. The Labor Department announced on Thursday that the consumer price index (CPI) increased 7.7% year-over-year in October, which while still elevated marks a meaningful decline from June’s peak 9.1% rate and the 8.2% print in September. When the volatile food and energy categories are stripped out, the ‘core CPI’ was seen rising 6.3% year-over-year in October, down from the 6.6% rate in September. The stock and bond markets responded very positively to the news, with the S&P 500 index climbing a stout 5.54% on the day and the tech-heavy Nasdaq posting a sharp 7.35% rally. Small-cap stocks also fared well, with the Russell 2000 rising 6.11%. In the fixed-income markets, the yields on 2- and 10-year U.S. Treasury bonds both retreated sharply, which meant that the underlying prices of those bonds went up. The 2-year U.S. Treasury tends to shift alongside expectations of future Fed policy, so the sharp decline in yield showed investors anticipating that the pace of Fed increases may moderate with the favorable inflation reading. Traders are betting that the Fed will raise the benchmark fed-funds rate by 50 basis points at the December meeting, easing concerns of another aggressive 75 bp rate hike.1

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8 of the Biggest Financial Mistakes You Should Avoid

Many investors, especially those who are trying to plan for retirement, may be wondering how to prepare for the future. With the current state of the market being volatile, there is no definite answer. However, we believe that it’s better to prepare for any given financial situation.
 
While there are many unknowns at present, we believe there are eight common mistakes that many investors make when planning for retirement. In our guide, 8 Retirement Mistakes to Avoid, we outline these mistakes and how you can potentially avoid them.
 
If you have $500,000 or more to invest and want to learn more, click on the link below to get your free copy:
 
Learn About the 8 Retirement Mistakes to Avoid!2

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Midterm Elections Still Undecided, Which May Drive Short-Term Market Volatility – Stocks tend to do well in the year following a midterm election. In fact, since 1950, the stock market has risen 100% of the time in the year following a midterm election. And not only do stocks tend to go up, but they also tend to go up by a lot. The average annualized forward total return for the S&P 500 index in the year following a midterm election is +18.6% (data from 1950 – 2018). A good argument for why stocks tend to outperform is that the president’s party historically loses seats in a midterm election, which recalibrates the balance of power and often leads to gridlock – which markets like. But it is also true that markets do not like uncertainty, and with many races yet to be called and the actual balance of power still in question, there are still many unknowns. In our view, we would not be surprised if markets exhibited volatility in the short term until final results become a certainty.3 

China Shows More Signs of Slowing – Economic data from China continues to show signs of weakness. This week, factory gate prices – which represent the prices charged by Chinese companies – fell for the first time in two years. High inventories in the United States and other export partners combined with an anticipated decline in demand have led Chinese companies to pull back on pricing. According to China’s National Bureau of Statistics, Chinese producer prices fell by 1.3% year-over-year. China’s exports also fell in October which surprised economists, signaling that the softening across the global economy is hitting trade as well. Economists were expecting 4% export growth and instead got -0.3%. Meanwhile, China continues to grapple with balancing its zero-Covid policy with efforts to revamp growth. By mid-November, China had locked down the manufacturing hub of Guangzhou, which has 4 million residents and is known as an export powerhouse. Major companies in China are signaling that China’s policies and slowing economic growth are having an impact. Apple Inc. warned investors that shipments of high-end iPhones would be lower-than-expected, and Foxconn Technology said plant disruptions and closed factories were hurting production.4

The U.S. Jobs Market Remains Strong Even as Tech Layoffs Rise – Headlines last week focused a lot of attention on sizable layoffs at some of the U.S.’s biggest technology firms, including Twitter and Facebook’s parent Meta. Of particular note was Facebook’s plans to lay off about 11,000 workers, or about 13% of its workforce. Salesforce also made waves by announcing it too planned to start laying off workers this week. While these layoff announcements seem at first glance like the beginning of a tidal wave of job losses, it’s important to note that tech layoffs so far account for a very small percentage of overall activity in the employment market. These recently announced layoffs will show up in the Labor Department’s November data, which we will not see until December. In October, the U.S. economy added 261,000 jobs, which still puts this job market in line with where it was before the pandemic.5

Retirement Mistakes to Avoid During Times of Uncertainty – While we can’t predict or control the future of the market, it is possible to stay focused on actions that can help guide your future investments. There are common mistakes and habits that we believe can help some investors succeed while others fail. Don’t fall prey to common investing mistakes!
 
To help you understand some of these mistakes and how to avoid them, we have created the guide, 8 Retirement Mistakes to Avoid.5
 
In this guide, we provide our thoughts on what we believe are 8 of the biggest retirement mistakes investors should avoid. If you have $500,000 or more to invest and want to learn more, click on the link below:

Disclosure

1 Wall Street Journal. November 10, 2022. https://www.wsj.com/articles/us-inflation-october-2022-consumer-price-index-11668050497?mod=hp_trending_now_article_pos1

2 ZIM may amend or rescind the free guide “8 of the biggest retirement mistakes investors should avoid” for any reason and at ZIM’s discretion

3 Wall Street Journal. November 7, 2022. https://www.wsj.com/articles/midterm-elections-2022-results-house-congress-11667973242?mod=djemRTE_h

4 Wall Street Journal. November 9, 2022. https://www.wsj.com/articles/china-producer-prices-turn-negative-in-warning-sign-for-global-economy-11667981170?mod=djemRTE_h

5 Wall Street Journal. November 10, 2022. https://www.wsj.com/articles/jobless-claims-ticked-up-but-remained-historically-low-11668088210?mod=economy_lead_pos4

6 ZIM may amend or rescind the free guide “8 of the biggest retirement mistakes investors should avoid” for any reason and at ZIM’s 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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