Second Win Secured:

The Astros won their second World Series in 6 years!

Global equities were mixed last week, with North American markets down, while Europe and Asia were higher. The China 300 (+6.4%) led the way on hopes of easing Zero-COVID restrictions.

The Nasdaq (-5.6%) and S&P500 (-3.3%) were the laggards. Rallies in energy and financials combined with losses in tech, consumer discretionary and utilities.

Last week’s Federal Reserve meeting led to a 75-basis point hike, as expected. The press release hinted that the rate hikes will slow.

However, Powell squashed positive market vibes with a series of messages, most notably higher interest rates for longer.

Markets began to price in a higher ultimate destination for Fed rate hikes above 5%, taking the two-year yield up 26 bps on the week to around 4.7%. After pushing below 4% in the lead-up to the FOMC, 10-year yields jumped again and finished the week above 4.15%.

Prices Knocked Out of The Park:

For those who follow government data, it’s a busy week. October’s CPI report is on Thursday.

Prices likely continued to rise at a stubbornly high pace with the headline figure expected to accelerate to +0.7% month to month. Excluding food and energy, the CPI likely increased 0.5%, leaving core inflation unchanged at 6.6% y/y and near its 40-year high.

High inflation will have major implications for Congress as Americans head to the polls tomorrow for the Midterm elections. Momentum has shifted towards the Republicans, who are battling to win both chambers from Democratic control.

If the Republicans control the House, or Senate, or both, a divided government will make it difficult to pass legislation that involves major changes to expenditures or taxation.

That is historically good for markets. Events in the U.K. show that financial markets react very negatively to policies perceived as opposing central banks’ anti-inflation efforts. Polls are suggesting the Republicans could gain control of the House though the Senate remains a toss-up.

Historically, positive seasonality begins shortly with about half of companies having now exited their repurchase blackout windows however the pace of buyback executions has slowed considerably.

2022 has followed previous midterm years in being a poor one for equities for 3 quarters. However, in the past, the elections have served as a positive catalyst for markets to rally into year-end.

Go Astros!

https://www.espn.com/mlb/story/_/id/34961958/phillies-zack-wheeler-caught-guard-pulled-game-6

 

Stock Talk Podcast: Value Stock or Value Trap? Trick or Treat

 

News Or Noise: Housing Values are Dropping – Is Bad News there Good News?

 

Interesting Articles:

November 2021 FOMC Minutes summary: https://www.cnbc.com/2021/11/24/federal-reserve-releases-minutes-from-its-november-meeting.html

November 2022 FOMC Q/A with J. Powell: https://www.cnbc.com/2022/11/02/fed-hikes-by-another-three-quarters-of-a-point-taking-rates-to-the-highest-level-since-january-2008.html

 

Disclosure

This content contains general information and expresses the views of Oak Harvest Investment Services. All data, articles, and information cited are believed to be reliable at the time of creation; however, Oak Harvest does not warrant any information contained herein to be correct, complete, accurate, or timely.

Oak Harvest provides links to content produced by other websites that OHFG does not control, and Oak Harvest does not necessarily approve or endorse such content and does not guarantee its accuracy. Nothing in this content constitutes personalized investment advice. Any charts, indicators, or graphs included or referenced in this content have limitations, and no such material is able, in and of itself, to provide a buy or sell recommendation for any security. Strategies and ideas discussed may not be right for you, and views and opinions expressed may change without notice. The strategies and ideas discussed will not apply to all client accounts or portfolios.

Nothing in this content constitutes a recommendation, or an offer, or a solicitation to buy or sell securities. Oak Harvest makes no assurance as to the accuracy of any forecast or projection made. Not all past forecasts or projections have been accurate. No current or future forecasts and projections are guaranteed to be accurate.  And future forecasts may not be as accurate as any forecasts discussed. Indexes like the S&P 500 are not available for direct investment and your results will differ. Past performance is not indicative of future results. Investing involves the risk of loss.