Amazing how a group of people meeting in Jackson Hole, Wyoming could send shock waves all the way to Wall Street, but that’s exactly what happened last Friday at the symposium of central bankers and academics. The annual three-day policy meeting was eagerly-watched as investors were hoping for more positive words from Fed Chairman Jerome Powell. At a press conference on July 27th, Powell suggested the Fed might raise interest rates in September by 0.50% and then pause for a while as more economic data was reported. Over the last several weeks, investors took this news as more confirmation that a “soft landing” could be engineered by the Fed as the U.S. economy was cooling but not crashing.

Hopes were dashed on Friday when the Chairman said the Fed was ready to take “forceful and rapid steps” to bring down inflation. He also acknowledged that the central bank’s actions will “bring some pain.” As if that wasn’t enough, Powell reminded the audience what steps former Fed Chairman Paul Volcker had to take in the late 1970s and early 1980s. In an effort to deal with skyrocketing inflation that peaked at 14.6%, Volcker raised interest rates to 20%.

Things are very different now than they were in 1980 or even 2008. Banks are well capitalized, and while home prices may suggest a “bubble,” it is due to a lack of supply in the face of growing demand for home ownership. The only way to deal with that imbalance is to have more homes built.

The supply chain issue is being resolved gradually and even oil prices have begun to decline. With over 10 million jobs available, the U.S. economy is on solid footing. The war in the Ukraine is definitely creating challenges for most nations.

The chart below from Charles Schwab shows the price movement of the S&P 500 in 2022. The blue line is the price of the index and the gold line is the 200-day moving average. You can see the S&P 500 hit the 200-day moving average but could not break through and hold above that line. That is considered to be very bullish when it happens. There were hopes last week that the markets would continue to rally and break through that resistance line. But for now, we’ll have to wait and see what develops at the Fed.

In light of this, investors have poured $11.7 billion in equity mutual funds and Exchange Traded Funds (ETFs) over the last two weeks. That’s a major shift from earlier in the summer when investors pulled over $44 billion from equity funds in June and July.

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The Markets and Economy

• Total household debt in the S. reached a record high of $16.5 trillion as of 6/30/2022. 70.5% of the total is mortgage debt (11.39 trillion). Interestingly, it is estimated that 23% of all U.S. households are debt-free according to the Federal Reserve Bank of New York.
• Business activity in the S., Europe and Japan fell in August, according to a new survey by S&P Global. High inflation, material shortages, delivery delays and interest-rate increases all weighed on business activity according to the survey.
• Oil producing members of OPEC fear a return of plunging crude prices by slowing global economies. To help stabilize prices, Saudi Arabia has suggested members could start reducing production to get crude prices back over $100 a barrel.
• To put into perspective, the number of job openings in theS. was 10.698 million as of June 2022. A decade ago (June 2012), there were 3.91 million jobs available according to the U.S. Department of Labor. As employers struggle to find workers willing to come back, they increase what they are paying. Still, employers are finding it difficult to find employees.
• Stores are fearing a disappointing holiday shopping season. Macy’s and Nordstrom are the latest retailers to lower their financial expectations for the remainder of 2022. As companies seek to slash excess inventory built up after Covid, shoppers may be the real beneficiaries.

In an effort to comply with London’s Heathrow Airport’s cap on departing passengers, British Airways is cutting more than 10,000 flights through the rest of summer flying season and into the winter. The planned cuts will affect short-haul flights to Europe.

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The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

Consult your financial professional before making any investment decision. You cannot invest directly in an index. Past performance does not guarantee future results.

This newsletter was prepared by David M. Kover®. To unsubscribe from the Weekly Market Update please write us at 555 Eastport Centre Dr., Suite B, Valparaiso, IN 46383 or click this link:  Unsubscribe .

Note: All figures exclude reinvested dividends (if any). Sources: Bloomberg, Dorsey Wright & Associates, Inc. and The Wall Street Journal. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

Securities offered through Triad Advisors, LLC, member FINRA/SIPC. Investment advice offered through Resources Investment Advisors, LLC, an SEC-registered investment adviser. Resources Investment Advisors. LLC and Vertical Financial Group are not affiliated with Triad Advisors, LLC.