Monthly Market Insights | September 2022
Renewed fears of higher rates and economic weakening, coupled with a tough talk by Fed Chair Jerome Powell and other Fed officials, sent stocks lower in August.
The Dow Jones Industrial Average dropped 4.06 percent whereas the Standard & Poor’s 500 Index fell 4.24 percent. The Nasdaq Composite lost 4.64 percent.1
A Strong Start
August started off well enough, building on the summer rally over the course of the month’s first two weeks. Investor sentiment was lifted by a surprisingly strong employment report that saw the economy add 528,000 jobs in July and later by a better-than-expected Consumer Price Index (CPI) report that saw inflation decelerate slightly.2,3
A fresh batch of positive earnings surprises provided an additional boost for stocks. Overall, the earnings season turned out to be better than what many investors had expected. With 97 percent of the companies comprising the S&P 500 reporting, 78 percent reported earnings that exceeded Wall Street analysts’ estimates.4
The fuel for the stock market’s rebound since the mid-June low was, in part, the belief that the Fed may ease up on the pace and magnitude of interest rate hikes owing to early signs that inflation may be cooling.
But Fed Chair Powell’s much-anticipated speech at the Jackson Hole Economic Symposium rattled investors. By the time Powell finished his speech on the morning of August 26th, the market was in full-on retreat. Powell’s comments did not include anything investors hadn’t already heard, but the forcefulness with which he communicated the Fed’s commitment to lowering inflation struck many investors as especially hawkish.
The market’s month-to-date gains disappeared following the speech as Powell appeared to end any investor hope of a pivot by the Fed. Stocks added to their losses in the month’s final days as investors confronted a monetary policy landscape that potentially offered little relief from further Fed interest rate hikes.
Most industry sectors ended lower for the month, including Communications Services (-3.53 percent), Consumer Discretionary (-4.50 percent), Consumer Staples (-1.85 percent), Financials (-1.96 percent), Health Care (-5.77 percent), Industrials (-2.83 percent), Materials (-3.48 percent), Real Estate (-5.62 percent), and Technology (-6.21 percent). The Energy (+2.65 percent) and Utilities sectors (+0.53 percent) registered a monthly gain.5
What Investors May Be Talking About in September
In the month ahead, all eyes will be on the Fed again when it meets in late September. After two consecutive 75 basis point hikes in June and July, the Federal Open Market Committee (FOMC) will once again be meeting to consider what’s next for short-term rates.
The outcome of this meeting, scheduled for September 20–21, appears more certain following Fed Chair Powell’s Jackson Hole speech. But the Fed has indicated that any potential rate hike will depend upon the economic data leading up to the meeting.
Some see the second consecutive quarter of GDP contraction and declining energy, metals, and food input costs influencing the Fed’s decision. Others believe that comments in August by Powell and other Fed officials that the inflation fight is not over may have thrown cold water on that hope.
Weakening economies in Western Europe and China rippled through overseas markets, with the MSCI-EAFE Index falling 4.61 percent last month.6
Losses were posted across European markets, including France (-5.02 percent), Germany (-4.81 percent), and the U.K. (-1.88 percent).7
Pacific Rim markets fared better, but still ended the month mixed. Hong Kong lost 1.0 percent while Australia picked up 0.60 percent.8
Gross Domestic Product (GDP)
The economy shrank at an annualized rate of 0.6 percent in the second quarter, an improvement from the initial estimate of a 0.9 percent contraction.9
Nonfarm payrolls increased by 528,000 in July, which was double the consensus estimate. The unemployment rate dipped to 3.5 percent, while average worker wages rose 5.2 percent from a year ago.10
Retail sales were flat month-over-month, but when excluding gasoline and auto sales, consumer spending rose 0.7 percent.11
Industrial output increased 0.6 percent—double Wall Street estimates—as oil and gas drilling reached a seven-year high.12
Housing starts declined 9.6 percent in July, as higher costs and mortgage rates pinched new construction activity.13
Existing home sales fell 5.9 percent from the sales in June, as higher interest rates weighed on buyer affordability. It was the sixth consecutive month that existing home sales have declined. Despite the softness, the median sales price rose 10.8 percent from 12 months ago.14
New home sales dropped to their lowest level since 2016, falling 12.6 percent in July. Compared with those a year ago, sales are down by 29.6 percent.15
Consumer Price Index (CPI)
Consumer prices eased in July but remained near record highs as the CPI rose 8.5 percent year-over-year.16
Durable Goods Orders
Durable goods orders were unchanged from the previous month, though were higher by 1.2 percent when excluding defense orders.17
Minutes from July’s Federal Open Market Committee (FOMC) meeting reflected a broad consensus among Fed officials that additional rate hikes were still required to combat elevated inflation, though acknowledging economic weakness may temper the size and pacing of such hikes.18
"Regarding developments abroad, central banks in advanced foreign economies had quickened the pace of policy tightening in order to address above-target inflation," according to the July meeting minutes. "Eight advanced-economy central banks raised their policy rates over the period."19
By the Numbers: Citizenship Day—September 17
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, or state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.
Investing involves risks, and investment decisions should be based on your own 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.
Any companies mentioned are for illustrative purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, timeframe, and risk tolerance.
The forecasts or forward-looking statements are based on assumptions, subject to revision without notice, and may not materialize.
The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.
The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. The S&P 500 Composite Index is an unmanaged group of securities considered to be representative of the stock market in general. The Nasdaq Composite is an index of the common stocks and similar securities listed on the Nasdaq stock market and considered a broad indicator of the performance of stocks of technology and growth companies. The Russell 1000 Index is an index that measures the performance of the highest-ranking 1,000 stocks in the Russell 3000 Index, which is comprised of 3,000 of the largest U.S. stocks. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark for the performance in major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. Index performance is not indicative of the past performance of a particular investment. Past performance does not guarantee future results. Individuals cannot invest directly in an index. The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost.
International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.
The Hang Seng Index is a benchmark index for the blue-chip stocks traded on the Hong Kong Stock Exchange. The KOSPI is an index of all stocks traded on the Korean Stock Exchange. The Nikkei 225 is a stock market index for the Tokyo Stock Exchange. The SENSEX is a stock market index of 30 companies listed on the Bombay Stock Exchange. The Jakarta Composite Index is an index of all stocks that are traded on the Indonesia Stock Exchange. The Bovespa Index tracks 50 stocks traded on the Sao Paulo Stock, Mercantile, & Futures Exchange. The IPC Index measures the companies listed on the Mexican Stock Exchange. The MERVAL tracks the performance of large companies based in Argentina. The ASX 200 Index is an index of stocks listed on the Australian Securities Exchange. The DAX is a market index consisting of the 30 German companies trading on the Frankfurt Stock Exchange. The CAC 40 is a benchmark for the 40 most significant companies on the French Stock Market Exchange. The Dow Jones Russia Index measures the performance of leading Russian Global Depositary Receipts (GDRs) that trade on the London Stock Exchange. The FTSE 100 Index is an index of the 100 companies with the highest market capitalization listed on the London Stock Exchange.
Please consult your financial professional for additional information.
Copyright 2022 FMG Suite.
1. WSJ.com, August 31, 2022
2. WSJ.com, August 5, 2022
3. CNBC.com, August 10, 2022
4. LipperAlpha.refinitiv.com, August 26, 2022
5. SectorSPDR.com, August 31, 2022
6. MSCI.com, August 31, 2022
7. MSCI.com, August 31, 2022
8. MSCI.com, August 31, 2022
9. FoxBusiness.com, August 25, 2022
10. CNBC.com, August 5, 2022
11. WSJ.com, August 17, 2022
12. MarketWatch.com, August 16, 2022
13. WSJ.com, August 16, 2022
14. WSJ.com, August 18, 2022
15. FoxBusiness.com, August 23, 2022
16. CNBC.com, August 10, 2022
17. WSJ.com, August 24, 2022
18. WSJ.com, August 17, 2022
19. Federal.Reserve.gov, August 17, 2022
20. Constitutioncenter.org, March 29, 2022
21. Venturacollege.edu, March 29, 2022