The people have spoken (at least those who voted), and 2023 and 2024 will be host to a divided government. The conventional wisdom is that a divided government is a good thing for markets. That’s not always, or even often, the case.
Surprising no one, the Federal Open Market Committee (FOMC) voted to hike its policy rate by 75 basis points (bps; 100 bps equal 1.00%) to a range of 3.75% to 4.00%.
Scary headlines and market risks are at the center of the conversation between John Hockers, co-head of Investment Analytics, and Brian Jacobsen, senior investment strategist at Allspring Global Investments.
The 10-year U.S. Treasury yield is so close to the dividend yield on the MSCI World High Dividend Yield Index, is equity income worth the risk? Why even bother with equities when bond yields are finally offering an alternative source of income? We see two reasons:
U.S. midterm elections are rapidly approaching. We break down the issues that may have the biggest market impact.
September’s Consumer Price Index (CPI) from the Bureau of Labor Statistics said inflation was 8.2% year over year, hotter than many expected. This inflation report solidifies our expectation that the Federal Reserve (Fed) will likely hike the federal funds rate by 75 basis points (bps; 100 bps = 1.00%) in November and by another 75 bps in December.
The Federal Open Market Committee just hiked its federal funds rate target another 75 basis points (bps; 100 bps equal 1.00%), to a range between 3.00% and 3.25%. Hiking rates aggressively is risky when housing is already struggling and when what the Federal Reserve (Fed) does today might not be fully felt for dozens of months into the future.
The old saying is that “talk is cheap.” It certainly isn’t if you’re a central banker. Investors hang on a central banker’s every word. Whether the Federal Reserve (Fed) hikes by 75 basis points (bps; 100 bps equal 1.00%) or 50 bps is probably less relevant than what Fed officials say with their Summary of Economic Projections (their guesses about what they’ll do in the future and how the economy may evolve).
Federal Reserve (Fed) Chair Jerome Powell gave a short and sweet speech at the Jackson Hole Economic Symposium on August 25, but the market took it as being brief and bitter. Since then, the Institute for Supply Management released its manufacturing and services indexes. Manufacturing activity has moderated, and services activity has been shockingly strong.
At his July 22, 2022, press conference, Federal Reserve (Fed) Chair Powell said that over the coming months, the Fed “will be looking for compelling evidence that inflation is moving down, consistent with inflation returning to 2%.” Is there clear, convincing, or compelling evidence that inflation is headed that way? Not yet. The outlook is still as clear as mud. Let’s look at a few factors that inform our outlook on inflation.