Weekly Economic Update: September 14th, 2022
Presented by Nicholas Wealth Management
September 14th, 2022
Weekly Market Update
In this week’s recap: Markets reverse based on higher-than-expected CPI report released Tuesday.
The Week on Wall Street
In a sharp reversal to the start of the week of trading, yesterday stocks had their worst day since June 2020. The consumer price index (CPI) report came in higher than expected at 8.3% year over year. Wall Street began pricing in a potential 100 basis point rate hike from the Federal Reserve during their September meeting.
The Dow Jones Industrial Average declined 4%, while the Standard & Poor’s 500 declined 4.3%. The Nasdaq Composite index declined 5.2%.
Today's market action has been choppy with a pause in selling.
No Inflation Walk Back
In his first public comments since his speech at Jackson Hole that sent markets into a tailspin, Fed Chair Powell did not seek to soften the edges of the Fed’s commitment to fighting inflation. In an interview last Thursday, Powell reaffirmed the need for sustained and robust actions to bring down inflation. He emphasized that it was critical that “the longer inflation remains well above target, the greater the risk the public does begin to see higher inflation as the norm, and that has the capacity to really raise the costs of getting inflation down.”4
With the Federal Open Market Committee (FOMC) set to meet on September 20-21, these comments as well as the higher-than-expected CPI report yesterday may indicate that market expectations of a rate hike of 0.75%-1.00% this month are likely. A 1.00% rate hike would be a significant event not seen since 1981.
Potential Railroad Strike
Talks of a potential railroad strike by 57,000 union employees create further headwinds for the economy. The strike would not only have an impact on an already strained supply chain but would also impact long-distance travelers and commuters that rely on Amtrak. Union members are upset about unpaid sick leave. A railroad strike would likely hurt the economy by around $2 billion per day. Railroads and unions have until Friday to come to a resolution before a strike would likely occur.
Tip of the Week
Think about making a household budget using an online spreadsheet. You can easily find or create one on the Web for free; some even have built-in calculators.
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If Republicans take back Congress, markets will likely head higher. If Democrats keep control of Congress, inflation will remain sticky and markets will head lower.
CITATIONS:
- The Wall Street Journal, September 9, 2022
- The Wall Street Journal, September 9, 2022
- The Wall Street Journal, September 9, 2022
- The Wall Street Journal, September 8, 2022
- CNBC, September 13, 2022
- https://url.us.m.mimecastprotect.com/s/jJ2SCZ6nmVtPEj4fMQYCfe?domain=reuters.com, September 13, 2022
- Bloomberg News, September 14, 2022
- CNBC, September 14, 2022
Please consult your financial professional for additional information.
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