Market Notebook

by | Oct 16, 2022

Discussion – 

Equity prices, as measured by ticker SPY, and bond prices, as measured by ticker BND, closed lower on the week.

SPY and BND appear established in a downward trend.

Market participants appear to be looking intently for signs that the Federal Reserve can ease off the rate hiking pace. Hotter-than-expected inflation data fueled continued negative sentiment. Last week’s data releases support continued aggressiveness by the Federal Reserve and provide few if any, signs that the Fed will soon ease the pace of rate hikes.

Regarding the real economy, the status quo continues. Significant inflationary pressures remain in the real economy, and the Federal Reserve continues to act to reign in those pressures.

Regarding bond fundamentals generally, yields have risen sharply. Certain shorter-duration bond investments look fundamentally attractive at current prices on strictly a yield-to-maturity basis. Additionally, these instruments carry an opportunity for price improvement. Think Apple, Amazon, or Microsoft 12 to 18-month paper, for example.

Given the technical analysis picture, it seems prudent to avoid equity or bond purchases until the downward price momentum slows. Specific fundamental opportunities may warrant exceptions.

All the best during the week ahead!

Disclaimer: Nothing in this discussion should be considered investment advice. The content of this discussion is strictly my personal opinion and subject to change at a moment’s notice. Investment advice can only be provided to you by your investment professional and not by a general market discussion such as this one. If you wish to speak with an investment advisor, contact us. We can probably help.