Dogwood Wealth Management | Weekly Newsletter (Week Ending 10/21/22)
InvestingWeek In Review
Economy
We're about a week and a half away from the Fed's next rate hike. The increase is widely expected to be the fourth consecutive increase of 0.75%. Since that number is already "baked into the cake" the burning questions are 1) what will the Fed do in December, and 2) going in to 2023, how long will the Fed keep rates higher before they ease up? There must have been a memo circulating among Fed officials for the past months to make sure the messaging was consistent, especially after the market got ahead of itself heading into the Jackson Hole meeting. However, we are starting to hear some comments that would suggest the Fed is at the very least aware of Wall Street's desires to ease up.
Meanwhile, we continue to hear ominous warnings from CEOs about the possibility of worsening economic news. A video of Goldman Sachs CEO and DJ David Solomon discussing the chances of a recession prompted this reply from Amazon CEO Jeff Bezos: "Yep, the probabilities in this economy tell you to batten down the hatches." It's not just Fortune 500 companies voicing concerns. The Fed's Beige Book was published this week, and while companies have been resilient thus far, there is a growing chorus of caution about a slowdown in consumer demands.
Markets
We had a nice rally in stocks this week with the S&P 500 up 2.93%. We're well underway into earnings season for the third quarter, and while expectations have been lowered for many companies, we're still seeing mostly positive results. Perhaps if companies can continue this trend of better-than-expected quarterly earnings, the market can sustain the current rally a bit, despite the significant headwinds of inflation and a slowdown in economic activity.
This week we'll hear earnings reports from a lot of the major tech companies on Wall Street, including Google, Microsoft, Amazon, and Apple. We'll also hear from Visa and Exxon. Those companies are 6 of the top 10 companies by size (market cap) in the US, so to say there's a lot on the line this week would not be an overstatement, at least in the short-term.