Economy
- Global equity markets retreated during the week ending September 23 after major central banks hiked interest rates. The Federal Reserve (Fed) raised interest rates by 75 basis at its September meeting, recording five rate hikes in 2022, and signaled that additional large rate increases are likely as it seeks to quell high inflation.
- The concerted effort to raise rates by global central banks unnerved investors. The Fed’s aggressive plans are expected to result in a sharp deceleration in economic growth. U.S. Treasury yields play a key role in the global economy, establishing a base for borrowing costs for consumers and businesses. A historically large climb in U.S. Treasury yields in 2022 has punished stocks and resulted in lower expectations for corporate profits.
- U.S. economic health slipped by 0.3% in August (as measured by the Conference Board’s leading economic index, a composite of 10 forward-looking components). A leading indicator is an economic factor that shifts before the rest of the economy. The reading signaled a decline in near-term economic activity and suggested growing recession risks. The Conference Board does not anticipate expansion in the U.S. economy in the third quarter of 2022 and predicts a possible short (but mild) recession by year end.
Stocks
- U.S. equities set new lows on a year to date basis. Health care and utilities fared best, while energy and materials led the decline. Growth stocks led value stocks and large caps beat small caps.
- Global equities closed lower for the week. Emerging markets fared better than developed markets.
Bonds
- The 10-year Treasury bond yield increased to 3.69% during the week.
- Global bond prices were in negative territory this week.
- High-yield bonds led, followed by global corporate bonds and global government bonds.
