Weekly Economic Update: September 27th, 2022
Presented by Nicholas Wealth Management
September 27th, 2022
Weekly Market Update
In this week’s recap: Fallout from Powell's comments continues.
The Week on Wall Street
Last week, Fed Chair Powell said the U.S. would not tame inflation without economic pain. This week heightened recession fears and sent stocks broadly lower.
The Dow Jones Industrial Average dropped 4.00%, while the Standard & Poor’s 500 lost 4.65%. The Nasdaq Composite index fell 5.07% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, declined 3.05%.1,2,3
Yields Surge, Stocks Tumble
Last week’s meeting of the Federal Open Market Committee (FOMC) proved unsettling for the financial markets. It wasn’t only the widely expected announcement of another rate hike but a more hawkish message that rates may be heading higher for longer than anticipated. Fed officials indicated that any policy change might be further off than investors had contemplated.
The latest rate hike caused bond yields to rise, with two-year and ten-year Treasury note yields touching levels not seen in over a decade. Global central banks moved in tandem with the Fed, as the Bank of England, Swiss National Bank, and Norway’s Norges Bank, among others, also hiked rates.4,5
Another Rate Hike
In its effort to cool inflationary forces, the Federal Reserve raised interest rates by 0.75% last week—the third consecutive rate increase of that size. Projections by FOMC members suggested that interest rates may increase by as much as 1.25 percentage points before year-end.6
The FOMC also projects that unemployment will rise to 4.4% by December 2023. This projection is up from its current level of 3.7%, and that core inflation will be 4.5% by year-end. In June, Fed officials projected core inflation would be at 4.3% by year-end. They also indicated that interest rates may reach as high as 4.6% in 2023, without any rate cut likely until 2024.7
Tip of the Week
Never leave money on the table when it comes to your workplace retirement accounts. If your employer offers to match contributions, strive to contribute enough so that you get the match.
Radio
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CITATIONS:
- The Wall Street Journal, September 23, 2022
- The Wall Street Journal, September 23, 2022
- The Wall Street Journal, September 23, 2022
- The Wall Street Journal, September 22, 2022
- CNBC, September 22, 2022
- The Wall Street Journal, September 21, 2022
- CNBC, September 21, 2022
Please consult your financial professional for additional information.
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