WEEKLY MARKET UPDATE

Despite surging geopolitical tensions and hotter than expected inflation data, stocks finished the week with gains as interest rates backed away from some of their highest levels in almost two decades.  Three separate inflation reports, the consumer price index (CPI), producer price index (PPI), and consumer sentiment inflation expectations indicated higher than anticipated numbers, but the markets mostly took the data in stride as gasoline futures fell to their lowest levels of the year this week and multiple Federal Reserve members indicated that the recent rise in interest rates made future rate hikes less urgent.  However, the situation in the Middle East is incredibly tense and heading into a particularly uncertain weekend, stocks were unable to hold a Friday morning rally on the back of strong third quarter (Q3) earnings from the major banks such as JPMorgan, Citigroup, and Wells Fargo.  Also worth noting, gold finished Friday the 13th up over 3%, its best day of the year as traders reduced risk into the weekend.

Over the next few weeks, we would generally expect Q3 earnings to play a more prominent role in markets, but the geopolitical backdrop is unusually volatile (to put it mildly) and markets will be closely watching events in the Middle East.  Markets seem to be assigning a relatively low likelihood of the Israeli-Hamas conflict expanding to include other countries such as Iran/Hezbollah and oil prices only rose about 2% on the week, but this situation is incredibly fluid and certainly no one could have predicted the atrocities of last weekend.  Next week will also feature a retail sales report for September, which will probably receive more attention than usual as investors look for impacts from the resumption of student loan payments.  In the meantime, we anticipate much higher than usual headline risk and elevated market volatility.

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

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