Churchill Management Group Monthly Market Update
by Craig Love, on October 14, 2022
- Monetary tightening and tough talk from the Fed continue to cause market volatility.
- In an attempt to quell unacceptably high inflation, the Federal Reserve is pushing rate hikes at the fastest pace seen in decades.
- Most of 2022 has been a reaction to high inflation and the Fed’s response of raising interest rates. There have been a couple of sharp rallies coming off extremely oversold levels and in hopes of peaking inflation and possibly a more friendly Fed.
- Recent hopes for a weaker-than-expected inflation number and a weak jobs report did not materialize.
- It is hard to blame market participants for thinking the Fed might have their backs.
- Since 2009, investors have become accustomed to the Fed providing a tailwind, a source that has come to the market’s aid at every sign of distress. That regime is at least on hold.
- Fundamentally, inflation remains the biggest concern since it has led to much higher interest rates enacted by the Fed to counteract it.
- This has led to P/E compression and raised the prospects of a hard landing. Luckily, so far, the economy has proven to be very resilient.
- We remain in a very defensive position. The Fed’s actions have clearly been aggressive and resulted in dislocations all around the world. We will simply have to wait to see how all of it plays out.
CHURCHILL MANAGEMENT GROUP
Source: Churchill Management Group
** 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.