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Market Recap (September 2022)

September 28, 2022
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The positive momentum of the past two months hit a major speed bump in the middle of last week. The markets remain focused on two factors: the strength of the economy and the anticipated actions of the Federal Reserve (Fed). 

Things continue to look solid on the economic front. August employment numbers showed 315,000 new jobs created, which was less than the number created in July, but still exceeded economist expectations. Unemployment did rise slightly, from 3.5% to 3.7% but this was likely a result of more Americans reentering the workforce. 

It was the August inflation report that rocked markets and led to significant losses on September 13th. That report showed August inflation rising 0.1% for the month, while it was expected to drop by 0.1%. The year-over-year inflation rate for August was

8.3% -- significantly higher than the Fed’s target. 

Prior to this report, the markets had anticipated that inflation had already peaked, so this unexpectedly high August report led to fears that the Fed would continue its current strategy of aggressive interest rate hikes longer than anticipated1

While the economy has thus far remained resilient, continued interest rate hikes will impact growth and could push us into a recession. Further, the Fed’s current singular focus on taming inflation with little regard to its impact on the economy has many investors worried.

The next regular meeting of the Fed is this week, with the likely outcome being another 0.75% increase to interest rates. Markets will pay particular attention to the percentage increase as well as comments by Jerome Powell, the Chairman of the Federal Reserve.

Wrapping up returns for the first half of the month, all major markets posted modest losses. As of September 15th, the Dow Jones Industrial Average fell by 549

points (1.74%), the S&P 500 dropped 54 points (1.36%) and the NASDAQ Composite Index was down 264 points (2.23%).

 

1 www.cnbc.com, “Dow tumbles 1,200 points for worst day since June 2020 after hot inflation report.” September 13, 2022