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  • Scott Poore, AIF, AWMA, APMA

Markets Struggle With Hawkish Fed Speak

Markets returned to the typical pattern of moving on every breath of the Fed last week. The fourth quarter continues to be subpar for corporate earnings.

With 69% of S&P 500 companies having reported, 69% have beat earnings expectations (below the 5-year average of 77%) and 63% have beat revenue expectations (below the 5-year average of 69%). The market listened and responded to the Fed last week and nearly every Fed speaker throughout the week was hawkish. While most speakers agreed that the Fed would have to be “more deliberate” when it comes to future rate hikes, they also reinforced the idea that “higher for longer” was in the cards. The futures on Fed Funds remains high (90%) for another 25 basis point rate hike in March.


This week we get the January inflation numbers and both CPI and PPI are expected to drop, which would make the 7th consecutive month of declines.

It can be argued that the Fed is no longer trying to control inflation, but rather, consumer demand. It might be working, too. Consumer Credit dropped in December, which was far below expectations—something we’ll have to watch to determine if it was just seasonal. However, the preliminary reading of the University of Michigan's Consumer Sentiment Index for February came in at the highest level since January of last year (when the Bear Market began). The Mortgage Market Index is showing signs of a bottom and mortgage applications have picked up over the several weeks. Additional Fed speakers this week will make things interesting.

 

Disclosures


The information contained herein is for informational purposes only and is developed from sources believed to be providing accurate information. The opinions expressed are those of the author, are for general information, and should not be considered a solicitation for the purchase or sale of any security. The decision to review or consider the purchase or sell of any security should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional.


Forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.


Any market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.


Past Performance does not guarantee future results.

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