All Eyes Now Focused On November

Investors looking for inflation relief in the September CPI data report were sorely disappointed as the gauge of consumer prices rose to a 40-year high.  There are many indications that inflation may start to moderate including an increase in announced layoffs by large corporations, falling auto prices, falling housing prices, a buildup of inventory, and the supply chain continues to come back online.  The primary areas of uncertainty continue to be record low unemployment and elevated oil prices.  As we know, monetary policy works with a lag of at least 6 months, which means the economy could start to cool over the next few quarters.  It is difficult to believe a recession can be averted, but only time will tell.

The next Fed meeting is November 1^st and 2^nd (there is no Fed meeting in October).  The first two weeks of November will be crucial as most economists believe we will have another ¾% rate hike by the Fed on November 2^nd and the U.S. holds mid-term elections on November 8^th.  Markets hate uncertainty and in less than a month some of the current uncertainty will be gone – we will know the Fed’s rate hike decision in November, we will have the October CPI numbers in mid-November, and the results of the mid-term elections should be known as well.

As we have mentioned in the past, the market is completely transfixed by the inflation data and this most likely won’t change until inflation begins to decline.  In the meantime, we believe we are getting closer to a tipping point where longer duration bonds could become attractive as could stocks, especially if the selloff in equities continues. 

Many retirees will receive a bit of relief from rising inflation as Medicare premiums go down next year and Social Security benefits rise by 8.7%.  We cannot remember a year when this has happened, and it will be most welcome news by many retirees who are on a fixed budget.

As always, we welcome your phone calls or emails if you have any questions or concerns. We hope you are enjoying the change of seasons wherever you may be.

The Bond&Devick Team