December 2022 PDS Planning Market Commentary

Quite a bit has happened in the markets over the last month. The US Stock market (S&P 500) rose just under 6% through the month of November and has gained about 10% since the start of October. Even the US Aggregate bond market index is up over 2.50% since then. Unfortunately, we’ve seen stocks react negatively to good news. Last week, job growth for November was stronger than expected. Good news. More people who were looking for jobs found them. But, the market and investors look at this good news as bad news for equities because it could imply economic strength at a time when the Fed and others are looking for confirmation of economic weakness. If investors continue to see more signs of a weakening economy, the Fed may slow, stop, or even begin to step back interest rates resulting in a better environment for the stock market to thrive.

To that point, the Federal Reserve and “central banks seem to be signaling a step-down in the size of the rate hikes, and in some cases, even a pause” according to Charles Schwab’s Jeffrey Kleintop. For example, “the U.S. Federal Reserve has signaled a slowdown in the pace of rate hikes from 75 basis points (bps) in November to 50 bps in December. The Bank of Canada stepped down from 75 bps to 50 bps in late October. The central banks of Australia and Norway stepped down from 50 bps to 25 bps at their meetings in October/November. The central bank of one of the largest emerging market economies, Brazil, and the central bank for the largest emerging market economy in Europe, Poland, both paused, leaving rates unchanged.”


Other significant news has come out of the second largest economy in the world, China. China’s zero-COVID policy has drawn the ire from major corporations whose production has been halted time and time again, and from the Chinese people directly affected. The most recent surge in Covid-19 cases resulted in more lockdowns which have been followed by protests against the policy from its citizens. Now, Chinese authorities are beginning to roll back some of their zero-COVID policies. Emerging market indices have reacted positively to the good news, but some are worried bad news may follow. During a time when global inflation may finally be starting to step back, a surge in economic activity in China may work to keep it elevated.

In this weird economic environment where good news is bad news and bad news is good news, all of us at PDS Planning hope your holiday seasons is filled with good news that’s actually good news. We are grateful to all who have been working with us and wish you a safe holiday season and happy new year!

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