Economic Developments & Market Update &
Market Update Economic Developments
- Positive earnings reports led to positive returns from leading technology and consumer discretion companies such as Apple and Amazon. The S&P 500 Index was up 8.10% in October, breaking its multi-quarter losing streak. The Index was still down -17.70% year-to-date as of the end of October.
- Mortgage Bankers Association (MBA) mortgage applications have been dropping for four months straight and are currently sitting at their 22-year low. Decreased demand in the housing market is due to continued interest rate increases, which have amplified the average 30-year fixed mortgage rate to just under 7%.
- The Consumer Price Index (CPI) has risen 8.2% since September 2021. Food and shelter are the most significant contributors to the overall rise in inflation.
Benchmark Indexes: Large Cap = S&P 500; Mid Cap = Russell Mid Cap; Small Cap = Russell 2000; International Developed = MSCI EAFE; Emerging Markets = MSCI EM.
Other Assets & Fixed Income Market Update &
Fixed Income Market Update Other Assets
- The Federal Open Market Committee increased their target for the federal funds rate by 0.75% at their November 2nd meeting to combat inflation. The early November increase has brought short-term borrowing to its highest level since January 2008. Chairman Powell said, “We think we have a ways to go; we have some ground to cover with interest rates… before we get to that level of interest rates that we think is sufficiently restrictive.”
- The spread, or difference in yield, between short-term and longer-term treasuries has inverted to levels not seen since the fall of 1981. From a historical perspective, an “inverted yield curve” has signaled upcoming recessionary periods.
- Core Fixed Income posted a -1.30% return in October. Bond prices have an inverse relationship with interest rates, and as long as the Fed continues to raise rates, bonds will likely continue to struggle.
- Midstream Energy remains a top performer, increasing 11.05% in October with a 24.53% return year to date.
FIXED INCOME AND OTHERS
Benchmark Indexes: Core Fixed Income = Bloomberg US Agg Bond; Municipal Bonds = Bloomberg Municipal 5Yr 4-6; High Yield = ICE BofA US High Yield; Floating Rate = S&P/LSTA Leverage Loan; Midstream Energy = Alerian Midstream
Information for this report was provided by CRA’s Investment Advisor, Innovest Portfolio Solutions.