Fed Expected to Continue Policy Pivot: The Federal Reserve lowered its benchmark borrowing rate by 0.50% in September and is likely to lower by another 0.25% this week.
Disinflation Trend Getting Close to the Conclusion: The September CPI reading showed consumer prices up only 2.4% y/y, the lowest reading since February 2021.
Earnings Season has Gotten off to a Strong Start: With 350 of the companies in the S&P 500 having reported earnings, 265 (75%) have beaten expectations. Earnings are the fundamental driver of equity returns over time.
Cutting From a Position of Strength: We believe the Fed is acting from a position of strength, proactively cutting rates to prevent policy from being overly restrictive and causing undue harm to the economy.
Equity Markets Took a Small Step Back in October: For the first month since April the S&P 500 posted a negative return in October. The index was down -0.9% for the month and has a total return of 21% for the year.
Data Over the Last Year Has Been Consistent with our View: With inflation falling and the economy continuing to grow, the key themes we have been discussing for more than a year have largely played out consistent with our view.
Equity Markets
The S&P 500 had its first negative return in the last 6 months in October, falling by just under 1%. Equity markets were having a solid month until the last two days, where the S&P and Nasdaq fell -2.2% and 3.3%, respectively.
The late month moves came after a few large cap technology companies announced earnings that, while meeting or beating sell side estimates, failed to impress investors.
We’ve fielded multiple questions from clients recently about the “market seeming high” and can it continue to move higher from these levels? While we won’t try and tell you what is going to happen over the next week, month, or quarter, what we can focus on is why do equity markets grow over time?
We often talk about how things impact the economy and what impact that will ultimately have on earnings. Since we are in the middle of earnings season (at the time of this writing, roughly 40% of the market cap in the S&P 500 has reported Q3 earnings), we thought this would be a good opportunity to remind everyone why earnings are the fundamental driver of equity returns and growth over time.
Earnings Season Starts Strong
Earnings Season Starts Strong
Highlights
Equity Markets
The S&P 500 had its first negative return in the last 6 months in October, falling by just under 1%. Equity markets were having a solid month until the last two days, where the S&P and Nasdaq fell -2.2% and 3.3%, respectively.
The late month moves came after a few large cap technology companies announced earnings that, while meeting or beating sell side estimates, failed to impress investors.
We’ve fielded multiple questions from clients recently about the “market seeming high” and can it continue to move higher from these levels? While we won’t try and tell you what is going to happen over the next week, month, or quarter, what we can focus on is why do equity markets grow over time?
We often talk about how things impact the economy and what impact that will ultimately have on earnings. Since we are in the middle of earnings season (at the time of this writing, roughly 40% of the market cap in the S&P 500 has reported Q3 earnings), we thought this would be a good opportunity to remind everyone why earnings are the fundamental driver of equity returns and growth over time.
Dreams are important.
Aspirations are what help make goals reality.