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Insights & Manager Commentary

Churchill Management Group Monthly Market Update - When Will Inflation Be Tamed?

by Craig Love, on September 15, 2022

  • When will inflation be tamed? That is the question that has markets jumping up and down over hopes that it will be sooner and fears that it will be later. 
  • It appears investors are struggling to discount the Federal Reserve’s new regime. This despite the fact that, in our view, the Fed has erased any doubts on its position to stay tighter for longer until inflation is under control.
  • As many Fed members have alluded to, it appears America’s central bank will be running with a single mandate - to reduce inflation - as long as inflation remains above 3%.
  • When that will be achieved is a great mystery. Markets seem to cheer when it appears it is sooner, but worries remain over much-tighter financial conditions leading to an economic recession.
  • The market debate rages on. On the negative side, the fear is that the Fed's new higher-for-longer approach to interest rates could prove to be too much of a headwind for the economy, especially because of the lag in the effects of monetary policy.
  • On the positive side, the economy, and particularly consumer spending, has held in the face of inflation keeping earnings in a, even if slow, growth mode.
  • From a technical perspective, the market got very oversold after Powell’s Jackson Hole speech. It bounced off those oversold conditions but Tuesday gave much of it back. 
  • There has been some constructive action since May. The entire formation here does meet the criteria for a complex bottoming process with multiple tests. Should it hold, we would aim to move to a more positive stance.
  • Given the back and forth and uncertainty in the conditions, we remain in a cautious position in our Tactical Strategies. 

Regards,

CHURCHILL MANAGEMENT GROUP

Source: Churchill Management Group

info@churchillmanagement.com 

** This report is meant to inform the reader of our current market opinion, which we, as professional money managers, use in our decision-making. It should be noted that stock market and bond market data are subject to varying interpretations and any one interpretation will not necessarily guarantee investment success. The information obtained from the sources specified herein and used as basis for our current market opinion is believed reliable, but we do not guarantee the accuracy of such information.

Topics:Manager CommentaryChurchill