At Zenith Wealth Partners, it is important that you are well informed about what is happening in the markets. Here are a few of the key topics of conversation that deserve the most attention this month. If you have any questions or would like to continue the conversation, please reach out.
Inflation remains to be one of the hottest economic topics as we close out the year, but new data shows inflation may finally be trending in the right direction. The October consumer price index (CPI) showed a 0.4% increase month over month and only a 7.7% increase from a year ago, which compares well to expectations of 0.6% and 7.9% respectively. Perhaps even more notably, core CPI, which excludes food and energy prices, rose only 3% for the month and 6.3% annually, compared to estimates of 0.5% and 6.5% respectively. This tells us that the Fed’s rate hikes are having an effect and bringing down prices, but we’re still nowhere near the 2% inflation target.
Although this data demonstrates that what has proven to have been relatively stubborn inflation may finally be easing, this did not stop another 75 basis point rate hike from the Fed at its November meeting. All eyes are on possible rate hikes in December; Jerome Powell has expressed the sentiment that the Fed would rather over-tighten than under tighten monetary policy and that future rate hikes may be smaller but will have a longer duration.
Markets responded positively to inflation news with the S&P 500 and NASDAQ increasing 5.54% and 7.35%, respectively, the day inflation data was released. Markets have risen 3.53% and 2.26%, respectively, month to date (as of November 28). Although investors have been able to benefit from this rally, we are still cautious about the economic outlook moving into 2023 and keeping an eye on the possibility of recession.
Also of note, the midterm elections! Though we are still waiting on some election results, it looks like the Democrats will have at least maintained (if not improved) their majority in the Senate. Although Republicans won the House, the margin was much narrower than expected. Although elections can have volatile, short-term implications on public markets, we are more interested in the long-term results of these elections. For example, how the new Congress will impact federal budgets or legislation related to energy, infrastructure, healthcare, etc.