Last week, OPEC+, which includes the Organization of the Petroleum Exporting Countries and allied oil producers like Russia, chose to cut production by two million barrels a day. The stated goal is to keep crude oil prices above $90 a barrel. The production cut, which will push gasoline and other prices higher, complicates efforts to fight inflation, reported Salma El Wardany and colleagues at Bloomberg.
According to economic data, the Federal Reserve’s inflation fight has produced mixed results, so far. Like the ghosts that visit Scrooge in A Christmas Carol, economic data offers information about what has happened in the past, what is occurring in the present, and what could happen in the future. Recently, the data has been sending mixed signals. Nicholas Jasinski of Barron’s explained:
“For the early part of this past week, a bad-news-is-good-news mentality ruled as each ‘disappointment’ was greeted with a surge. Fueled by data showing softer manufacturing activity and a sharp decline in job openings, the [Standard & Poor’s 500 Index] put together a 5.7% jump on Monday and Tuesday…It was all downhill from there, though, as hawkish remarks from Fed officials, stronger services data and Friday’s jobs report drove home the point that we’re still a ways away from an economy or labor market that justifies the end of tightening.”
Stock prices are considered to be a leading indicator. They offer information about what investors expect to happen in the future. Last week, investors changed their minds mid-week. Despite price volatility, major U.S. stock indices finished the week higher.
U.S. Treasury yields moved higher last week, too, with the yield on the two-year Treasury finishing the week at 4.3 percent, while the yield on the 10-year Treasury finished at 3.9 percent. When short-term yields are higher than long-term yields, the yield curve is “inverted,” which has historically been a sign that the bond market thinks the U.S. is headed for a recession.
“The shape of the curve is among the most widely watched financial-market barometers because it reflects bondholders’ views of where interest rates and the economy are headed. When the curve inverts, with long yields dropping below short ones, it signals expectations of a slowdown that will drive rates lower in the future,” reported Michael Mackenzie and Ye Xie of Bloomberg.
It’s difficult to know what will happen in the future. That’s why investment portfolios are built around investors’ short- and long-term financial goals. It is easy to lose sight of your goals, though, when markets are volatile. If you’re feeling overwhelmed and uncertain, please get in touch. We’re happy to talk about your concerns and help you find solutions.
https://www.bloomberg.com/news/articles/2022-10-05/opec-panel-recommends-2-million-barrel-cut-to-output-limits (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/10-10-22_Bloomberg_OPEC+%20Rebuked%20by%20US%20After%20Cutting%20Output%20to%20Keep%20Prices%20High_1.pdf
https://www.barrons.com/articles/the-stock-market-fought-the-fedand-paid-the-price-51665187660?mod=hp_columnists (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/10-10-02_Barrons_The%20Stock%20Market%20Fought%20the%20Fed%20and%20Paid%20the%20Price_2.pdf)
https://www.bloomberg.com/news/articles/2022-10-06/bond-market-sees-once-easy-yield-curve-bets-upended-by-fed-path (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/10-10-22_Bloomberg_Bond%20Market%20Sees%20Once%20Easy%20Yield-Curve%20Bets%20Upended%20by%20Fed%20Path_5.pdf)
https://www.youtube.com/watch?v=uSELZ1A5OT8 [1:05 to 1:08]
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* 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.
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