Weekly Economic Update: October 4th, 2022
Presented by Nicholas Wealth Management
October 4th, 2022
Weekly Market Update
U.S. and U.K. saw financial turbulence last week with a recovery to start this week.
The Week on Wall Street
Markets recovered nicely yesterday and today and are on track for their best two-day gain in the last two years. We are watching key resistance levels to see the sustainability of the current two-day market rally. The U.S. dollar has recently weakened, which has given fuel to the current recovery from last week.
Rising recession fears and uncertainty in the bond and currency markets sent stocks to new 2022 lows last week.
The Dow Jones Industrial Average declined 2.92%, while the Standard & Poor’s 500 slumped 2.91%. The Nasdaq Composite index fell 2.69%. The MSCI EAFE index, which tracks developed overseas stock markets, lost 1.94%.1,2,3
A Tumultuous Week
U.S. stocks were under pressure all week due to recession concerns and unsettled trading in the bond and currency markets. This stress followed economic steps out of the U.K. During the previous week, the Bank of England (BOE) raised interest rates, and its prime minister announced unfunded tax cuts that the markets interpreted as inflationary.
U.S. bond yields rose early last week, sending stocks lower until Wednesday’s rally following news that the BOE would buy U.K. government bonds. U.S. stocks resumed their descent the following two days to close out a disappointing week, month, and third quarter.
The Bank of England Acts
Global bond and currency markets have been volatile recently due to global central bankers raising interest rates to combat inflation. Developments in the U.K. took center stage last week when the BOE announced it would be buying long-dated U.K. government bonds. Upending the financial markets was the previous week’s announcement of tax cuts by the country’s new prime minister, a step many investors viewed as counterproductive to the BOE’s inflation-fighting efforts.
The BOE’s decision to begin temporary purchases of government bonds was well-received by capital markets, sending U.K. bond yields lower and boosting U.K. stock prices in the immediate aftermath.
Tip of the Week
If you’re shopping for a homeowner policy, feel free to ask for a discount. If you can demonstrate that you are taking steps to reduce risk, you may be able to negotiate one.
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CITATIONS:
- The Wall Street Journal, September 30, 2022
- The Wall Street Journal, September 30, 2022
- The Wall Street Journal, September 30, 2022
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