The Federal Reserve (Fed) wrapped up its last Federal Open Market Committee (FOMC) meeting of the year last week, where it hiked short-term interest rates for the seventh time in as many meetings, taking the fed funds rate to 4.5% (upper bound). A day later, both the European Central Bank (ECB) and the Bank of England (BoE) also hiked interest rates, taking their respective policy rates to the highest levels since 2008. Over 90% of central banks have hiked interest rates this year, making the (mostly) global coordinated effort unprecedented. The good news? We think we’re close to the end of these rate hiking cycles, which could lessen the headwind we’ve seen on global financial markets this year.
Despite the S&P 500 Index starting December with five consecutive days of losses, we think December is down but not out. December often starts slow but historically has been a strong month. There are also some potentially supportive seasonal patterns ahead, such as the Santa Claus Rally, the outlook for January following down years, and the third year of the presidential cycle. ‘Tis the season, and this week LPL Research looks at some important seasonal patterns as the year winds down.
Economic and corporate data support the initial strong reads on holiday retail sales despite the macro headwinds, reinforcing the idea that today’s consumer is in a better position than usual at this point in the business cycle. However, consumers were likely tapping into credit and using savings to support spending. In this week’s Weekly Market Commentary we share insights on publicly traded retailers, analyze their underperformance year to date, and look forward to 2023.
Recent inflation data has tempered expectations for future Federal Reserve tightening, including a potential peak in the terminal rate near 5.0% in May or June of 2023. While the market has welcomed this news, history suggests the path to a Fed pivot could be volatile for stocks due to elevated inflation and interest rate risk. In this week’s Weekly Market Commentary, we explore historical equity and fixed income market performance surrounding a Fed pivot, including the prospect for solid stock performance in the back half of 2023.
The growth vs. value debate has been pretty one-sided in 2022, with value outperforming growth for a sustained period for the first time in almost 15 years. However, the debate is heating up as investors begin to consider whether the pendulum will swing back to growth if inflation and interest rates decline in 2023. In this week’s Weekly Market Commentary we look at the factors driving value’s 2022 outperformance, the technical trading setup for growth and value, and what to look for in the coming months.