Weekly Perspective

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October 3, 2022

 

The Weekly Wrap-Up.

It was a tumultuous week. In the United States, Hurricane Ian pummeled Florida and South Carolina. Analysts estimate the destruction in Florida will cost U.S. insurance companies about $63 billion, although the cost of recovery will be much higher. “The total economic damage will be well over $100 billion, including uninsured properties, damage to infrastructure, and other cleanup and recovery costs,” according to a source cited by Max Reyes of Bloomberg.

 

In the United Kingdom, fiscal and monetary policies collided last week. Britain’s new government plans to encourage economic growth with a stimulus package to offset energy costs and big unfunded tax cuts. The government’s fiscal stimulus plan could spark at the same time Britain’s central bank is trying to tamp inflation down. Investors showed their disapproval by selling U.K. government bonds, which are known as gilts. As yields surged, gilts rapidly lost value, imperiling the nation’s pension funds. The Bank of England staged an emergency intervention, calming bond markets by promising to continue its bond purchases, reported Brian Swint of Barron’s.

 

Inflation continued to be a concern around the globe. In the U.S., the Personal Consumption Expenditures Index was released last week. It showed prices rose 6.2 percent year-over-year in August. In the 19-member Eurozone, inflation was up 10 percent in September, largely because energy prices are up more than 40 percent year-over-year, reported Elliot Smith of CNBC. In Argentina, the central bank lifted its benchmark rate for the ninth time – to 75 percent – in an effort to tame inflation.

 

The war in Ukraine continued to affect food and energy supplies, driving prices higher. The agreement between Russia and Ukraine that allowed some grain exports to Europe, Asia, the Middle East and Africa in July and August appears to be in jeopardy. Russia is reconsidering the agreement, and has threatened to reject it, which could exacerbate food insecurity in some countries and drive food prices higher. 

 

On Friday, major U.S. stock indices were in bear territory, closing at 52-week lows, reported Ben Levisohn of Barron’s. The yield on benchmark U.S. Treasury notes rose to a 14-year high before falling back a bit to finish the week at 3.8 percent.

Securities offered through LPL Financial. Member FINRA/SIPC.

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.

* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate, and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.

* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.

* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.

* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.

* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.

* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* Past performance does not guarantee future results. Investing involves risk, including loss of principal.

* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.

* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

* Asset allocation does not ensure a profit or protect against a loss.

* Consult your financial professional before making any investment decision.

* This is not intended to be a substitute for specific individualized tax advice. We suggest you discuss your specific tax issues with a qualified tax advisor.

* These views are those of Carson Coaching, and not the presenting Representative, the Representative’s Broker/Dealer, or Registered Investment Advisor, and should not be construed as investment advice.

* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named firm.

Sources:

https://www.bloomberg.com/news/articles/2022-10-01/raging-markets-selloff-in-five-charts-36-trillion-and-counting?srnd=markets-vp (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/10-03-22_Bloomberg_Raging%20Markets%20Selloff%20in%20Five%20Charts_1.pdf)

https://finance.yahoo.com/quote/%5EGSPC?p=%5EGSPC

https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value=2022

https://www.barrons.com/articles/stock-market-peak-inflation-51660350613 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/10-03-22_Barrons_Peak%20Inflation%3F%20Not%20So%20Fast_4.pdf)

https://www.reuters.com/markets/europe/door-slams-fed-put-market-pain-takes-back-seat-inflation-fight-2022-09-28/

https://www.ft.com/content/3b347f19-3735-4a8d-bee3-cbc589b202c5 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/10-03-22_Financial%20Times_Historic%20Sell-off%20in%20Bonds%20Shows%20How%20the%20Investor%20Mood%20Has%20Darkened_6.pdf)

https://www.barrons.com/articles/are-stocks-near-a-bottom-51658530867 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/10-03-22_Barrons_Are%20Stocks%20Near%20a%20Bottom%3F_7.pdf)

https://www.reuters.com/markets/europe/global-markets-flows-graphic-2022-09-30/

https://www.forbes.com/sites/sergeiklebnikov/2022/06/02/heres-how-the-stock-market-performs-during-economic-recessions/?sh=432665a76852 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/10-03-22_Forbes_How%20Does%20the%20Market%20Perform%20During%20an%20Economic%20Recession_9.pdf)

https://www.bloomberg.com/news/articles/2022-09-30/hurricane-ian-to-cost-us-insurers-63-billion-risk-modeler-says (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/10-03-22_Bloomberg_Hurrian%20Ian%20Will%20Cost%20US%20Insurers_10.pdf)

https://www.barrons.com/articles/bond-yields-treasuries-51664525327 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/10-03-22_Barrons_Global%20Bond%20Yields%20Stabilize_11.pdf)

https://www.barrons.com/articles/pound-uk-economy-crisis-51664297282?mod=article_inline (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/10-03-22_Barrons_The%20UK%20Economy%20is%20Having%20a%20Meltdown_12.pdf)

https://www.bea.gov/data/personal-consumption-expenditures-price-index

https://www.cnbc.com/2022/09/30/euro-zone-inflation-soars-to-record-high-of-10percent-for-september.html

https://www.bloomberg.com/news/articles/2022-09-17/charting-the-global-economy-inflation-winds-keep-blowing-strong (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/10-02-22_Bloomberg_Charting%20the%20Global%20Economy_15.pdf)

https://carnegieendowment.org/politika/87930

https://www.barrons.com/articles/how-low-will-the-stock-market-go-s-p-3300-might-just-be-the-start-51664583948?refsec=the-trader&mod=topics_the-trader (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/10-03-22_The%20Fed%20is%20Starting%20to%20Break%20Things_17.pdf)

https://www.cnbc.com/2022/09/30/treasury-yields-slip-across-the-board-after-sharp-stock-sell-off.html

https://www.brainyquote.com/quotes/stanley_druckenmiller_897239