Monthly Outlook - October 2022

SUMMARY OF THE MONTH

September continued to batter investors across asset classes and markets, with U.S. stock indexes falling below their June lows, 10-year U.S. Treasuries briefly rising above 4% and currencies falling sharply against the real dollar.

The key news centered on a higher-than-expected CPI print for August, which proved wrong those who claimed inflation had peaked in July and strengthened the odds of a hard landing as Powell maintained his strong stance.

The UK saw both its bonds and currency fall precipitously as tax cut announcements roiled currency markets, driving the GBP to its lowest levels in history.

MACRO CORNER

September saw more pain in all markets, with stocks falling below their June lows and completely reversing the rallies of July and early August (as we have been forecasting since July), further consolidating the bear market trend we have been in since the beginning of the year.

A key aspect of the market decline was the extremely disappointing inflation numbers that came in early September. Following Chairman Powell's speech in Jackson Hole, which was infused with Volcker references and spooked the markets, we saw CPI rise again in August after being flat during July. In addition to an add, Fedex issued an earnings warning that sees Q2 EPS at 1TP4Q2.75 versus the estimate of 1TP4Q5.48. That's a great earnings warning and shows the economic pain we face.