Inflation Lower – Market Higher – Monday Morning Market Memo – November 14, 2022

Inflation Lower – Market Higher – Monday Morning Market Memo – November 14, 2022

The major stock market averages posted a strong rally last week – the Dow Jones Industrial Average rose 4.1% to 33,748 – the Standard & Poor’s 500 Index jumped 5.9% to 3,993 – while the NASDAQ Composite, the leader of the pack, surged 8.1% to 11,323.  Most of the gains came on Thursday (when the Dow rose over 1,200 points and the S&P gained over 5%) after the release of inflation data from the U.S. Bureau of Labor Statistics for the month of October.

The Consumer Price Index showed a lower-than-expected increase in prices for October, with headline inflation rising 7.7% year-over-year, versus estimates for an 8% increase, while core inflation (which excludes the more volatile food and energy prices) came in at 6.3%, also cooler than markets were expecting.

Investors were optimistic the easing inflation will translate into less aggressive interest rate hikes by the Federal Reserve, and that the timeline for ending hikes may move up.  The Fed’s rate hiking campaign has been weighing on stock prices this year, and the market jump last week was based on belief by market participants that both inflation and Fed hawkishness may have peaked – leading to the large weekly gain.

Last week’s market action is illustrative of how counterproductive market timing can be.  Those who were out of the market are now faced with the difficult decision of getting back in at higher prices, or waiting for another dip and then facing yet another timing decision.  We believe in time in the market, rather than timing the market!

Looking to the week ahead, we’ll get a view of the health of the consumer and the retail sector.  The Census Bureau is scheduled to report October Retail Sales Wednesday morning, with markets expecting a .9% increase.  Also, earnings reports out this week are concentrated with retailers, as companies including Home DepotWalmartAdvance Auto PartsLowe’sTJXTargetKohl’s, and Macy’s, are scheduled to announce results.

As always, please contact us with any questions you may have or if you would like to set up a meeting.

All the best – Southport Station Financial Management, LLC