Rate Hikes And Recession Fears Drag On Markets

By Scott Poore, AIF, AWMA, APMA
Chief Investment Officer, Eudaimonia Group

Despite the lack of Fed speakers, markets pulled back on rate hike and recession fears.  This week, Inflation and the Fed’s Interest Rate Decision highlight a loaded week of economic data.  In fact, there were no Fed speakers last week during the “blackout” period leading up to this week’s meeting.  There should be light at the end of the Fed Rate Hike tunnel as futures on this week’s decision still stand at 74% in favor of only a 50 basis point hike.  If that is the case, it would be the first rate hike since June of this year that would be a 75 basis point hike.  However, bond yields were up in expectation of the rate hike.  There was good news on the consumer front.  Factory Orders were up more than expected (+1.0%) and higher than the previous month’s +0.3% reading.  Consumer Credit was steady, which means consumer aren’t loading up on debt and they aren’t ceasing spending.

The University of Michigan’s Consumer Sentiment figure for December (preliminary) was higher and the reading for consumer expectations of inflation was lower.  Market’s even took the PPI print in stride.  The Services component of PPI was the driver in a higher-than-expected number, but the number was flat with the previous month.  The CPI release this week is expected to be lower.  That, plus the Fed’s rate decision, could make trading bumpy this week.

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