Markets were not spooked by last week’s inflation and yield curve data, and instead focused on generally positive corporate earnings. The S&P 500 gained 3.97% and bonds rallied for a gain of 1.65% for the Bloomberg Aggregate Bond Index. Strong results from several leading industrial, consumer staples and energy companies rightfully caught investors’ attention1. Apple’s earnings helped as well. Nearly 70% of companies reporting Q3 earnings so far have beaten both top- and bottom-line expectations1. Earnings, resilient economic growth, and a seasonally strong period for equities historically pushed the S&P 500 to gain of 5.02% in October.

Nonetheless, we think investors need to remain balanced and patient in this environment. The 10-Year Treasury yield slipped below the 3-Month Treasury yield last week, which has historically been a recession indicator.  Likewise, the Fed’s preferred inflation gauge, the Core Personal Consumption Expenditures Index, increased by 0.5% in September and 6.2% year over year, numbers still far too high for the Fed’s liking2. The significant increase in interest rates year to date driven by Fed policy to fight this inflation has led to significant volatility.  Current inflation data, along with continued tight labor markets, likely gives the Fed more room to continue raising interest rates at its meetings this coming week and in December. We think the Treasury yield curve is now suggesting the Fed may have to drive the economy into recession to stamp out inflation. In recessions, earnings typically fall in aggregate, which we’ve not seen yet. But that may be the case for 2023. We don’t think investors should be spooked by this information or make rash decisions. Rather, investors must make prudent preparations with financial planning and portfolio balancing. We welcome the recent rally in equities but believe the volatility we’ve witnessed for most of 2022 will return to haunt us again. Happy Halloween!

Thank you for your confidence in our team,

Asset Management Department

Sequoia Financial Group


Sources:  1. Factset,  2.  Ned Davis Research

The views expressed represent the opinion of Sequoia Financial Group. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and nonproprietary sources that have not been independently verified for accuracy or completeness. While Sequoia believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sequoia’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in equity securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. Past performance is not an indication of future results. Investment advisory services offered through Sequoia Financial Advisors, LLC, an SEC Registered Investment Advisor. Registration as an investment advisor does not imply a certain level of skill or training.

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Investment advisory services offered through Sequoia Financial Advisors, LLC, an SEC Registered Investment Advisor. Registration as an investment advisor does not imply a certain level of skill or training.

Even Frightful Data Couldn’t Spook the Markets Last Week | Sequoia Financial Group


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