September is often a bad period for stocks and last month was no exception. Both the S&P and NASDAQ tumbled about 10% while the Dow experienced its worst September in 20 years. All told, equities are on pace for their worst annual performance since 2008, when markets crashed amid the global financial crisis.
Interest rate policy and stubbornly high inflation – the culmination of which have sparked recession fears – continue to drive the declines.
Good Life Nova in the media
As you may recall, stocks performed well for about a four-week stretch beginning in mid-July. At the time, the latest customer price index (CPI) print suggested that the rate at which prices were increasing had started to cool, stirring up hopes among investors that policymakers may begin to pull back on some of their most aggressive rate hikes.
But after August CPI data showed an unexpected spike in inflation, those hopes were dashed, and stocks fell steeply. That August print no doubt played a huge role in the Fed’s decision to boost rates by another 75 basis points last month, the third consecutive so-called jumbo hike.
To make matters worse, Fed Chair Jerome Powell made it clear that policymakers are not done, saying that more rate hikes could be in store down the road – even if that approach produces economic pain for families and equity market declines.
What I’m reading
There is no question that 2022 has been a tough year for both stock and bond investors, however, looking back at history, we see some possible reasons for optimism
As the chart below shows, stocks have historically performed well in the year following a midterm election. In the shorter term, the second chart shows that October and November have been the two strongest months, historically, in a midterm year (going back to 1950).
Additionally, the Fed may be a bit more cautious as the their aggressive rate hikes have drawn the attention of the UN Conference on Trade and Development due to the risk of causing significant harm to developing countries if it persists with rapid rate rises.
Whatever happens, investors are best served over the long term through disciplined financial planning. So, if you ever have any questions, please don’t hesitate to contact us or schedule a time to chat. And if you have friends or family who would like to bend someone’s ear and talk about the current environment, tell them to reach out as well. We’d love to hear from them.