November 4, 2022

Weekly Market Insights, Data And Commentary

We strive to keep you regularly updated with important economic data, market changes, and news.

Please find Schwab Markets & Economy Disappearing Act: Earnings by Liz Ann Sonders, Chief Investment Strategist, this week’s Market Monitor from Goldman Sachs, Weekly Market Commentary from BlackRock Investment Institute and Advisor Group November Market Analysis: Midterm Elections and Market Performance by Phil Blancato, Chief Market Strategist, attached below.

This week, I’ve also begun adding some of my own commentary to these headline topics/themes in italics.

1. Schwab’s Liz Ann Sonders’s Markets and Economy theme this week is that earnings weakness is starting to materialize across a broader swath of industries, with hits coming from a strong dollar, weaker demand, and aggressive monetary policy.
2. Market Monitor from Goldman Sachs provides a global market data perspective to help explain the issues and trends affecting your portfolios.
3. BlackRock Investment Institute Weekly Market Commentary is focused on Central Banks Tightening From All Sides. Overtightening monetary policy by central banks has guaranteed the global economy of recession and investors over the last 2 weeks are betting on the Fed to turn dovish which is not what the Fed is transmitting to the markets.
4. Lastly, as the midterm elections are upon us, it’s important to use history as a guide according to Phil Blancato in his November Market Analysis. The markets may have reached their bottom and some of the best market performance comes after large down markets and a newly divided Congress is installed.

The tried and true adage, “Don’t Fight the Fed” comes to mind.

The Fed and Jerome Powell have continually transmitted to the markets that they intend to break inflation and the high cost of living, which includes the housing market.

In order to do so they must raise interest rates enough to create SIGNIFICANT deflationary price pressures on housing specifically (the housing component of the Fed’s favorite inflation indicator, core PCE is 18% and housing inflation is very sticky, as prices change much slower than commodities, goods, and services).

Many market participants have yet to fully grasp the Fed’s memo as they are betting that it will be politically difficult to continue raising interest rates, especially given the rising cost to service the US National Debt, and have been buying the market over the last 2 weeks into the November midterms.

Our view is that central bankers strongly believe they’ll be able to PRINT aka QE (Quantitatively Ease) their way out of any political or market calamities that result in over-tightening monetary policy. Fed head Jerome Powell specifically made reference to the “TOOLS” in their quiver this week, which is Fed-speak for QE money printing.

This is also why we believe GOLD is the best way to hedge all opposing views and largely replaces the traditional 10-40% bond “buoy” allocation component of an investor’s portfolio, as it will act as a significant medium and long-term return component once the Fed does finally pivot and the US Dollar begins to weaken at a greater rate than it’s global fiat peers

In our view, this time may likely be different but it’s important to keep tabs on post-election market performance going into the end of the year as many great dividend-paying stocks are reaching attractive valuations.

However, not paying attention to deteriorating economic data/fundamentals and disregarding themes like Liz Ann Sonders’ and BlackRock’s this week is not a good risk management strategy with such instability underpinning the global economy, markets, and geopolitical environment.

There’s also the BIG ELEPHANT in the room still looming- the unprecedented QE global debt bubble that has yet to burst. We tend to take a more realistic risk management approach by not jumping in too early as opposed to the often, pollyannaish, “always stay invested in the market” strategists,- even if they make good historical references as history does often rhyme.

Even though interest rates have risen on bonds, CDs and money market accounts to levels not seen in 12+ years, it’s our belief that it remains prudent to keep your powder dry in FDIC-insured cash and US Treasury Bill only money markets in order to weather the impending financial/economic storm we believe will continue to play out over the next year or more as geopolitics and a globalized economy decouple into a multi-polar environment. If we’re wrong and the winds begin to change economically, you’ll be ready to move into attractive investments at much more stable pricing with limited downside risk.

That’s all for this week! We’re here to answer any questions you may have! Please don’t hesitate to reach out