REPRIEVE:  After weeks of market declines caused by interest rate fears, stocks rose this week.  After three weeks of losses, some of the gains were likely caused by investors trying to find bargains.  Several measures of consumer and investor sentiment are at very low figures.  When that is the case, the market is often oversold, and this may have given the bargain hunters confidence.  In addition, corporate earnings continue to point to resilient U.S. corporations.  The market rally this week was broad, affecting all sectors.

LONGER-TERM PERFORMANCE:  Below are the annualized three-year and five-year numbers for these same indices.  

CHINA HELPING WITH INFLATION:  China continues its zero-tolerance COVID lockdowns and it is struggling through a property slump and weak domestic economic growth.  China’s economy is quite large on the global scale, and thus if China is slowing, it affects global demand everywhere.  China’s economy grew by 0.4% in the second quarter, it’s weakest reported growth rate in two years.  It seems to be having a positive effect on inflation.  Commodity prices are coming down, especially oil prices which have dome down by $35 a barrel from three months ago (according to the West Texas Intermediate Index).  Iron ore prices are down 40%.  In 2021, China consumed 72% of the world’s iron ore imports.  Other energy commodities are also coming down in price.  Natural gas is an exception largely due to Russia, and there remain plenty of other factors that continue to put upward pressure on inflation in the U.S. such as the tight labor market and rising housing costs.  

THE U.S. LABOR MARKET REMAINS STRONG:  222,000 Americans filed initial unemployment claims, a decrease from the prior week and the fourth straight week of declines.  

EUROPE RAISES RATES:  Last week, the European Central Bank raised interest rates 0.75% (sound familiar?).  This only gets its key rate up from zero.  The ECB was using a negative interest rate for an extended period of time.  It had to raise rate by 0.50% in July just to get it to even.  The ECB indicated that further hikes were likely in the coming months to combat inflation.

CANADA RAISES RATES:  Last week, the Bank of Canada raised its key interest rate by 0.75% to 3.25%, the fifth consecutive increase this year.

U.S. MORTGAGE LENDERS RAISE RATES:  According to Freddie Mac, the average 30-year mortgage rose to 5.89% this past week.  This is the highest since 2008 when rates topped out at 6.52%.

HOME EQUITY DOING WELL:  As you can see below, the overall percentage of equity U.S. homeowners hold in their homes fell dramatically in 2008.  It stuck there for a short while, and has been growing since.  Of late, the rise in home equity has been driven by constantly rising prices for home.  This will certainly taper off as affordability challenges home buyers and interest rates begin affect the market.  Note that this graph includes homeowners that hold their homes without a mortgage.

MY LITTLE GIRL’S LITTLE GIRL!:  Slightly more than a year ago, I had the awesome privilege of walking my daughter Molly down the aisle.  I sang “My little girl” to her during the reception.  Now that little girl and my son-in-law Guido have announced the wonderful news that they are expecting a little girl of their own.  Hang on Guido, it’s quite a ride!  I couldn’t be happier or more excited, and I can’t wait to meet her.

Have a great week!

“There are long periods when life seems a small, dull round, a petty business with no point, and then suddenly we are caught up in some great event which gives us a glimpse of the sold and durable foundations of our existence.”  Queen Elizabeth II

“Now it is required that those who have been given a trust must prove faithful.”  I Corinthians 4:2

SOURCES: 
REPRIEVE: wsj.com/articles/global-stocks-markets-dow-update-09-09-2022-11662725916?mod=markets_lead_pos3
EUROPE RAISES RATES: wsj.com/articles/ecb-raises-interest-rates-by-a-historic-0-75-point-as-europe-stares-at-recession-11662639573?st=ybf6v7muf9g1hpm&reflink=article_email_share
CANADA RAISES RATES: /toronto.citynews.ca/2022/09/07/interest-rate-bank-of-canada/
U.S. MORTGAGE LENDERS RAISE RATES:  businessinsider.com/mortgage-rates-highest-since-2008-housing-crash-will-raise-more-2022-9
THE U.S. LABOR MARKET REMAINS STRONG: dol.gov/ui/data.pdf
CHINA HELPING WITH INFLATION: finance.yahoo.com/news/china-exports-slow-amid-covid-031140057.html AND wsj.com/articles/oil-prices-slump-as-recession-fears-grow-11662839059?mod=hp_lead_pos5 AND wsj.com/articles/a-slowing-china-helps-rein-in-inflation-around-the-world-11662296400

(c) 2022 A.D., Stonecrop Wealth Advisors, LLC, All Rights Reserved

*S&P 500: This is a measure of the performance of the 500 largest companies in the United States, and it a common index to track the performance of U.S. equity markets, especially the large cap markets. 
*MSCI All Country World Index X US: This is a broad measure of the performance of worldwide equity markets excluding the United States. 
*Bloomberg Barclays U.S. Aggregate: This is a measure of the U.S. bond markets.