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Cautiously Remain Invested
September 30, 2022
Remaining invested in equities amidst all the volatility and uncertainty may not be easy, but it is important. Looking back to the last time inflation was this high, despite an aggressive Fed and three separate recessions, investors that stayed in were unlikely disappointed.
Where do we go from here?
August 30, 2022
The second half of 2022 is off to a good start, but where do we go from here?? Tim Urbanowicz, CFA, outlines three different scenarios that could play out and our thoughts on each.
Indicator Snapshot
INDICATOR
LATEST READING
NEXT ANNOUNCEMENT
SIGNIFICANCE
WHAT TO WATCH
Fed Funds Rate
0.75% hike in July. Current target range of 3%-3.25%
November 1st & 2nd, 2022
- Increases or decreases borrowing costs
- Impacts the overall level of economic activity
- Immediate impact on equities, bonds, and the US dollar
- Given continued economic strength, we believe another 0.75% hike is on the table for the November meeting
- A Fed pivot is unlikely coming any time soon
Consumer Price Index
8.2% YoY, 0.4% MoM increase on October 13th, 2022
November 10th, 2022
- High inflation incentivizes the Fed to increase rates
- Impacts the overall cost of living and stability of consumers
- We believe it will take time to get inflation back down to the Fed’s 2% target
- Shelter and food prices continue to tick higher which is likely to pressure consumers over time.
NonFarm Payrolls / unemployment
- 263K increase in September, outpacing the consensus estimated 255k.
November 4th, 2022
- Indicates if the labor market is expanding or contracting
- Associated with the health of the overall economy
- Can influence Fed action
- We believe the employment picture needs to soften to see meaningful progress on inflation
- Any “good news” likely isn’t going to be favorable for equities
Consumer Spending
0.6% gain in September, above the consensus estimated 0.4% gain.
December 1st, 2022
- Consumer spending accounts for ~70% of GDP growth
- High impact on corporate profits and investment decisions
- Spending has been resilient up to this point, but has been supported by a drop in consumer savings, which is down to 2008 levels.
- We expect near term strength to fade over the next several quarters.
Purchasing Managers’ Index (PMI)
Fell from 50.9 in September to 50.2 in October, above a consensus estimated reading of 50.
November 1st, 2022
- Leading Indicator of economic growth
- A reading above 50 generally signifies the economy is expanding, a reading between 41.1 & 50 signifies the economy is contracting, and a reading below 41.1 signifies the economy may be in a recession.
- The ISM Manufacturing Index has come down meaningfully from the highs, but remains above 50, highlighting the resilience of the economy to Fed action up to this point.
- We expect the index to soften over the next several quarters as the impact of rate hikes sets in.
Gross Domestic Product
Positive 2.6% growth in Q3, above the consensus estimated 2.4%.
November 30th, 2022 (Q3 number)
- Lagging snapshot of economic growth.
- Economic growth drives corporate profits and investment decisions
- A second consecutive quarter of negative real GDP growth, checks off the technical definition of a recession, however, the NBER has yet to make the official call.
- Employment remains extremely strong which may support near term growth, however, look for recent Fed action to make its way into the data in mid ’23.
ECONOMIC RELEASE CALENDAR
NOV 2022
SUN
MON
TUE
1
Construction Spending (Sep.) 10am ISM Manufacturing Index (Oct.) 10am JOLTS (Sep.) 10a Vehicle Sales (Oct.) afternoon
WED
2
ADP Employment (Oct.) 8:15am FOMC Statement 2pm
THU
3
Productivity (Q3) 8:30am Initial Jobless Claims 8:30am International Trade (Sep.) 8:30am ISM Non-Manufacturing Index (Oct.) 10am Factory Orders (Sep.) 10am
FRI
4
Employment Report (Oct.) 8:30am
SAT
5
SUN
6
MON
7
TUE
8
WED
9
THU
10
Initial Jobless Claims 8:30am CPI (Sep.) 8:30am
FRI
11
Veterans Day U. Mich Consumer Sentiment (Nov.) 10am
SAT
12
SUN
13
MON
14
TUE
15
PPI (Oct.) 8:30am NY Empire Manufacturing Index (Nov.) 8:30am
WED
16
Import/Export Prices (Oct.) 8:30am Retail Sales (Oct.) 8:30am Industrial Production (Oct.) 9:15am NAHB Market Index (Nov.) 10am Business Inventories (Sep.) 10am
THU
17
Initial Jobless Claims 8:30am Housing Starts (Oct.) 8:30am Philly Fed Manufacturing Index (Nov.) 8:30am
FRI
18
Existing Home Sales (Oct.) 10am
SAT
19
SUN
20
MON
21
TUE
22
FOMC Minutes (Nov.) 2pm
WED
23
Durable Goods (Oct.) 8:30am Initial Jobless Claims 8:30am New Home Sales (Oct.) 10am
THU
24
Thanksgiving Day
FRI
25
SAT
26
SUN
27
MON
28
TUE
29
FHFA Home Price Index (Sep.) 9am S&P CS Home Prices (Sep.) 9am
WED
30
ADP Employment (Nov.) 8:15am GDP (Q3 2nd) 8:30am Wholesale Inventories (Oct.) 8:30am Chicago PMI (Nov.) 9:45am JOLTS (Oct.) 10am Pending Home Sales (Oct.) 10am
THU
FRI
SAT

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