Investment Commentary –December 15th, 2022

Year to Date Market Indices as of December 15th, 2022
• Dow 33,277 (-8.16%)
• S&P 3,911 (-17.87%)
• NASDAQ 10,892 (-30.23%)
• OIL $85.12 (12.84%)
• Barclay Bond Aggregate (-8.36%)

Here’s what the Federal Reserve’s half-point rate hike means for you

The Federal Reserve raised interest rates for the seventh time this year to cool inflation.

The rates you get for a mortgage, credit card, car loan, student debt and savings could be affected.

The Federal Reserve raised its target federal funds rate by 0.5 percentage points at the end of its two-day meeting Wednesday in a continued effort to cool inflation.

Although this marks a more typical hike compared to the super-size 0.75 percentage point moves at each of the last four meetings, the central bank is far from finished, according to Greg McBride, chief financial analyst at Bankrate.com.

“The months ahead will see the Fed raising interest rates at a more customary pace,” McBride said.

“I thought we would be in the midst of a recession at this point, and we’re not,” said Laura Veldkamp, a professor of finance and economics at Columbia University Business School.
“Every single time since World War II the Federal Reserve has acted to reduce inflation, unemployment has shot up, and we are not seeing that this time, and that’s what stands out,” she said. “I couldn’t really imagine a better scenario.”

What the federal funds rate means for you

The federal funds rate, which is set by the central bank, is the interest rate at which banks borrow and lend to one another overnight. Whether directly or indirectly, higher Fed rates influence borrowing costs for consumers and, to a lesser extent, the rates they earn on savings accounts.

For now, this leaves many Americans in a bind as inflation and higher prices cause more people to lean on credit just when interest rates rise at the fastest pace in decades.

With more economic uncertainty ahead, consumers should be taking specific steps to stabilize their finances — including paying down debt, especially costly credit card and other variable rate debt, and increasing savings, McBride advised.

Market-moving news

Oil slick: The price of U.S. crude oil fell around 11% for the week to less than $72 per barrel. The latest weekly decline pushed oil prices into negative territory on a year-to-date basis, as oil ended 2022 around $75. The latest price is down nearly 23% from a recent high in early November.

Volatility reversal: An index that measures investors’ expectations of short-term U.S. stock market volatility rose around 19%, climbing for just the second week out of the past eight. In the previous week, the Cboe Volatility Index slipped to the lowest level since mid-August.

China’s reopening: China’s government on Wednesday eased some of the strict COVID-19 rules that have recently weighed on the world’s second-largest economy. Leading up to the announcement, a Chinese stock index rallied for five consecutive weeks in anticipation of the policy changes.

The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investments.

https://www.marketwatch.com/ (Market Indices)
https://www.jhinvestments.com/weekly-market-recap (Around the Web & Upcoming Events)
https://finviz.com/groups.ashx (YTD Performance Chart)
https://finance.yahoo.com/news/stock-market-news-live-updates-october-12-2022-121220378.html
https://www.cnbc.com/2022/12/14/heres-what-the-federal-reserves-half-point-rate-hike-means-for-you.html