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Weekly Market Update 9/2/2022

By September 2, 2022 September 15th, 2022 No Comments

Stocks finished lower on the week as last Friday’s speech from Fed Chair Jerome Powell that championed Paul Volcker (Fed Chair from 1979-1987) and mentioned economic “pain” as a side effect of battling inflation continued to weigh on investor sentiment.  As a result, the S&P 500 has given back roughly half of the 17% rally off June’s lows as investors have been confronted with the notion that perhaps the Federal Reserve will continue to raise rates longer than some had believed.  However, stocks did attempt to rebound Friday morning after a goldilocks (not too hot, not too cold) jobs report for August indicated that while the labor market added more jobs than expected, the unemployment rate actually rose from 3.5% to 3.7% as more workers returned to the labor force.  In addition, wage growth came in below expectations and added to growing hopes of peak inflation.  Investors cheered the report and stocks appeared poised to head into the Labor Day weekend with strength.

Unfortunately, geopolitics had other ideas and Friday’s rally began to lose steam after noon.  The market reversal coincided with headlines out of Europe that Russia’s state-owned energy company, Gazprom, would halt gas flows to Europe via its pipeline, the Nord Stream, for longer than previously planned.  Energy prices are already at crisis levels in Europe and the potential for Russia to expand its weaponization of energy flows likely reignited market uncertainty around energy availability heading into the winter.  As a result, traders chose to sell stocks into a long weekend with the potential for more geopolitical headlines.

Next week we get important data around the services sector as well as another speech from Jerome Powell on Thursday.  Also noteworthy will be the European Central Bank (ECB) policy announcements on Thursday, as they are expected to raise 75 basis points while they also attempt to tackle inflation.  We also expect markets to be sensitive to more headlines around the Nord Stream pipeline, as despite wage growth and input costs showing encouraging signs of slowing (i.e., 12th straight week of lower US gas prices), any further supply side shock in energy markets would come at a particularly unwelcome time.

On a more positive note, we want to wish you a wonderful holiday weekend!
Our office will be closed Monday in observance of the Labor Day holiday.

Ian G. Browning, CFA
Managing Director, Investment Strategies | Shareholder

Thanks to our clients and friends who have referred business to us over the years. Your endorsement has been the cornerstone of our growth and our greatest compliment.

Janice Lynch

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