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THIS WEEK'S UPDATE

| September 07, 2022
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Last Week on Wall Street

The overhang of Fed Chair Powell’s Jackson Hole speech the previous week carried over into last week as

investors recalibrated stock valuations amid a seemingly more assertive monetary policy stance. The Dow

Jones Industrial Average fell 2.99%, while the Standard & Poor’s 500 stumbled 3.29%. The Nasdaq

Composite index lost 4.21%. The MSCI EAFE index, which tracks developed overseas stock markets, slid

4.90%.
 

Stocks Extend Losses

Investors remained unnerved by the aggressive tone of Jerome Powell’s speech and subsequent comments

from Fed officials suggesting a higher rate hike than the market expected at the Fed two-day meeting ending

September 21. The probability of a 75 basis point hike in September rose to nearly 65%, up from just 28% a

month ago.  Stocks moved steadily lower before finding some footing on Thursday. Friday’s employment

report appeared to strike a “goldilocks” note (i.e., labor gains not so strong that it might trigger greater Fed

hawkishness but robust enough to allay imminent recession fears). After early gains, stocks turned lower

ahead of the holiday weekend. 
 

Employment Shines

Employers added 315,000 jobs in August, maintaining the labor market’s remarkable resiliency amid a

contracting economy. The unemployment rate rose to 3.7%, up from last month's 3.5%. The gain followed

an uptick in the labor participation rate, which expanded from 62.1% to 62.4%. Wages continued to grow,

rising 0.3% in August and 5.2% from 12 months ago. Sectors seeing the most significant increases in new

jobs were professional and business services, healthcare, and retail. Lagging sectors were manufacturing,

financial, and wholesale trade. 
 

This Week: Key Economic Data

Thursday: Jobless Claims.
 

This Week: Notable Companies Reporting Earnings

Thursday: Zscaler, Inc. (ZS), Docusign (DOCU).

Friday: The Kroger Co. (KR).
 

Final Thoughts
The fear of inflation and higher interest rates are driving the market at the moment. The bear case is always most

compelling near the lows. Markets have dips but I dont think this is a collapse for the US or Europe though there could

be more volatility short term. Don’t fall into the trap of believing all the doom you see out there. 

The current malaise is unlikely to go on forever. This may be to the contrary of what mainstream media would have you

believe, but let’s face it fear sells.  

 

The next CPI report will come out on September 13th.  The data points to inflation continuing to roll over.  We will

need to see several months of this before the Fed can soften their tough tone on raising interest rates.  However, as I

have stated many times markets are forward looking and will see through the rhetoric to the reality of data.  

Corporate earnings have been holding up well.  This provides some insulation to the downside of the market.  

If earnings begin to crack on a widescale basis, then the market may have more downside ahead.  I say “may”

because I believe a fair amount of this has been priced in on some level due to some of the most negative sentiment

I have witnessed in my 25 years in this industry.  However, fear and panic can create a short-term frenzy even if it

is not logical.  This is where, as they say, money moves from weak hands to strong hands.  Those with more than a

3-week time horizon will step in and snap up bargains for the longer term.  Those that gave up will say “see you

can’t make any money in the market.”  Warren Buffet has strong hands and would disagree with that statement.  

His company, Berkshire Hathaway has spent a third of the cash they have been sitting on for many years in the last

9 months.  Let that sink in for a moment.
 

I have a lot more I can say about what is happening and what is expected to happen, but I will save it for a later

date.  The only item the market is going to care about in the next week is the CPI data that comes out next Tuesday.  

Until then the market is moving on speculation and fear.  
 

Stay tuned…

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