• Fed Funds rate hiked to 3.75%, as expected
• Job growth still strong-ish
• Election results and CPI release could keep markets choppy                    

Markets rallied in October, with the Dow jumping nearly 14%¹, on hopes the Federal Reserve would signal interest rate hikes were nearing an end. That seemed to be the case on Wednesday afternoon, with changes to the Fed Policy Statement signaling the pace of rate hikes could slow following the announced 75bps increase². The Dow Jones Industrial Average was up 400 points point following the statement’s release³. However, Chairman Powell threw cold water on the idea of a near-term Fed pivot in his post-meeting press conference, saying it’s premature to be talking about pausing rate hikes⁴. Stocks then turned lower, with the Dow ending the day down 505 points⁵.

Friday proved almost as volatile, with the major stock averages all up more than 1.5% on Friday morning, falling back to near even, and then rallying Friday afternoon⁶. The employment report released on Friday showed the economy added 261,000 new jobs in October, slightly stronger than expected, but the smallest number we’ve seen on a monthly basis since late 2020⁷. Weaker job numbers are, conversely, positive for the markets as they could show that the economy is slowing, and therefore the Fed’s rate-hiking cycle could be nearer its end than its beginning.

Third-quarter earnings season is winding down, but news that could affect the markets continues this week with nationwide elections taking place on Tuesday. Delayed results could lead to further volatility, but we strongly caution against making investment decisions based on the political winners or losers. A Forbes study earlier this year showed the best average stock market returns occurred during periods with a split Congress⁸. We’ll also get a new CPI reading Thursday. The consensus estimate is 8% inflation year over year⁹– still a long way from the Fed’s 2% target. We’ll also be looking at natural gas storage numbers¹⁰, which have helped gas prices come down in recent weeks, to see if those of us in the north will be socked with higher winter heating bills.