“Autumn carries more gold in its pocket than all the other seasons.”
-Jim Bishop
Here’s what you need to know this week:
· Markets reach new all-time highs despite rising yields
· Earnings and inflation give the economy a temperature check
New Office!
The day has finally arrived! We are slated to start moving into our new office this Friday! Quick reminder that our new location is just down the road from our old office:
The new office’s address is:
3817 NW Expressway Suite 1030
Oklahoma City, OK 73112
Since we will begin the moving process at the end of this week & the start of the following week, the office will be a little messy in the next few days. We will be hosting open house events once we are fully settled into the new office so keep an eye out for those announcements coming soon!
Divergence
The three major stock indexes all gained ground last week as investor optimism remains high. The S&P 500, Dow Jones and NASDAQ respectively rose 1.2%, 0.9% and 0.6%[1]. Odds of an interest rate hike fell dramatically after light readings in both inflation and the job market; as of writing, the bond market is assigning an 81% chance of no rate hike when the Federal Reserve meets later this month[2].
This enthusiasm is decidedly not shared by the bond market. When bond investors sell bonds en masse, the selling pressure pushes bond prices lower which raises the bonds’ yields higher. As you can see below, bond investors began selling bonds and moving to cash at the onset of the Iran war in late February, and that selling has accelerated in recent weeks:
This prolonged rise in rates has coincided with record levels of cash moving to money market funds; last week, money market funds received a record $166.4 billionin net inflows[3]. Essentially, bond investors are moving to cash because they expect a market/economic downturn in the near future, while stock investors still hold a rosy outlook. It remains to be seen who is right.
Heat Check
This week we receive two insights into the economy in the form of inflation and earnings. Later this morning we will receive the Consumer Price Index (CPI) report for the month of September; Wall Street analysts expect the report to show monthly inflation at 0.6% and annualized inflation at 3.6%[4]. A light print may give some reprieve to the lagging bond market, while a hot print may put an interest rate hike back on the table.
Second is the start of Q3 earnings season. All publicly traded companies are required to report their earnings every quarter, and this week investors will get a look under the hood at America’s most important companies. The major US banks are among the first companies to report, and their earnings reports can give multiple insights into the state of the economy through their commercial lending, mortgage lending, credit card lines, etc. With less than a month to go until the midterms, investor anxiety may cause outsized swings to the up- or downside depending on the inflation and earnings reports, so don’t give too much credence to any one print.
What Else
· President Trump announced a deal to purchase Russian detail in his ongoing effort to lower fuel prices
· Houthi rebels attacked the airport in Saudi Arabia’s capital city of Riyadh, killing sixteen people and wounding more than 300
· Legendary NFL coach Mike Ditka passed away at the age of 86
· OU plays Kentucky at 6:30 PM CT on the SEC Network
· OSU plays #22 Houston at 6:30 PM CT on FOX
What We’re Reading
Four astronauts returned to Earth last week after an eight-month stint aboard the International Space Station. A SpaceX rocket carried the astronauts, hailing from the US, France and Russia, to a safe splashdown in the Pacific Ocean off the coast of Los Angeles. Click below to read about the astronauts’ mission and to see pictures and video of their return:
What’s Happening Downtown
The Myriad Gardens is hosting Pumpkinville every day through October 25th. This event features thousands of pumpkins, family activities, a carousel and murals all based on this year’s theme of Route 66. Tickets are $15 for ages 3 and up while children under 3 may enter for free; click below to learn more:
· Pumpkinville at Myriad Gardens
To read more from our blog, click here
Written by: Kane Ogle, CFP®
Steve Beck, Kane Ogle, CFP®, Amber Eduvigen, CFP®, Cale Olbert, CFP®, Brett Valentine, CFP®, Brandon Ingerson, Bill Daniel, Sam Postich, Jenni Hess, Hannah Hartman
[1] Investopedia [2] CME Group [3] BG Finance [4] Yahoo! Finance