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<\/p>\nI\u2019ve been asked what we thought about the magnitude and sustainability of last week\u2019s market reaction to Thursday\u2019s CPI print.\u00a0We love putting things into context and last week\u2019s rally is very difficult to do so.<\/p>\n
Thursday\u2019s CPI print spurred one of the biggest 1-day moves in history. If you\u2019ve been a long-term reader, you would know that many of the market\u2019s largest moves occur during the midst of a bear markets (please reach out if you\u2019d like this data). Thursday\u2019s market movement was a wild swing, but this year has been full of market swings! Luckily, this swing was to the upside.<\/p>\n
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Putting It into Perspective<\/strong><\/p>\n <\/p>\n Thursday\u2019s move for both stocks and treasuries is a clear market definition of a right tail event. One of our partners, Piper Sandler, ran some numbers to put the move into context:<\/p>\n <\/p>\n <\/p>\n <\/p>\n <\/p>\n <\/p>\n <\/p>\n <\/p>\n Why Did the Market React the Way that it Did?<\/strong><\/p>\n <\/p>\n The market now expects a lower and earlier peak rate than it did before yesterday; basically, the terminal rate was moved lower and Fed Funds cuts are pricing in to occur sooner. If you\u2019ve heard us talk recently, you\u2019d know that we are probably on the side that these expectations are a bit too optimistic.\u00a0Why?<\/p>\n First, the broad inflation picture hasn\u2019t changed. Secondly, the Fed officials who spoke after the CPI release yesterday continue to sound focused on bringing inflation down. Thus, I\u2019d be surprised to see if the median FOMC member changed their expected peak rate from 5% (which the market is pricing in < 5% now).<\/p>\n \u00a0<\/em><\/p>\n \u00a0<\/em>What Would Prevent a Year-End Rally?<\/strong><\/p>\n <\/p>\n It appears that a 50bps hike can be written in stone in December. But with earnings season over and CPI looking suddenly very encouraging, what could prevent the market from rallying into year end? These are the top risks that come to our mind:<\/p>\n <\/p>\n <\/p>\n <\/p>\n \u00a0<\/strong><\/p>\n Disclosures<\/strong><\/p>\n <\/p>\n Past performance is not indicative of future results. This material is not financial advice or an offer to sell any product. The information contained herein should not be considered a recommendation to purchase or sell any particular security. Forward looking statements cannot be guaranteed.<\/em>\u00a0<\/em><\/p>\n This commentary offers generalized research, not personalized investment advice. It is for informational purposes only and does not constitute a complete description of our investment services or performance. Nothing in this commentary should be interpreted to state or imply that past results are an indication of future investment returns. All investments involve risk and unless otherwise stated, are not guaranteed. Be sure to consult with an investment & tax professional before implementing any investment strategy. Investing involves risk. Principal loss is possible.<\/em>\u00a0<\/em><\/p>\n Projections or other forward-looking statements regarding future financial performance of markets are only predictions and actual events or results may differ materially.\u00a0<\/em>\u00a0<\/em><\/p>\n The Consumer Price Index (CPI) measures the change in prices paid by consumers for goods and services. The CPI reflects spending patterns for each of two population groups: all urban consumers and urban wage earners and clerical workers.\u00a0<\/em>\u00a0<\/em><\/p>\n The S&P 500\u00ae Index is the Standard & Poor’s Composite Index and is widely regarded as a single gauge of large cap U.S. equities. It is market cap weighted and includes 500 leading companies, capturing approximately 80% coverage of available market capitalization.<\/em>\u00a0<\/em><\/p>\n The 10 Year Treasury Rate is the yield received for investing in a US government issued treasury security that has a maturity of 10 year. The 10-year treasury yield is included on the longer end of the yield curve. Many analysts will use the 10 year yield as the \u201crisk free\u201d rate when valuing the markets or an individual security.<\/em>\u00a0<\/em><\/p>\n When a page is marked \u201cAdvisor Use Only\u201d or \u201cFor Institutional Use\u201d, the content is only intended for financial advisors, consultants, or existing and prospective institutional investors of Aptus.\u00a0These materials have not been written or approved for a retail audience or use in mind and should not be distributed to retail investors.\u00a0 Any distribution to retail investors by a registered investment adviser may violate the new Marketing Rule under the Investment Advisers Act.\u00a0 If you choose to utilize or cite material we recommend the citation, be presented in context, with similar footnotes in the material and appropriate sourcing to Aptus and\/or any other author or source references. This is notwithstanding any considerations or customizations with regards to your operations, based on your own compliance process, and compliance review with the marketing rule effective November 4, 2022.<\/em>\u00a0<\/em><\/p>\n Advisory services are offered through Aptus Capital Advisors, LLC, a Registered Investment Adviser registered with the Securities and Exchange Commission. Registration does not imply a certain level or skill or training. More information about the advisor, its investment strategies and objectives, is included in the firm\u2019s Form ADV Part 2, which can be obtained, at no charge, by calling (251) 517-7198. Aptus Capital Advisors, LLC is headquartered in Fairhope, Alabama. ACA-2211-13.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":" I\u2019ve been asked what we thought about the magnitude and sustainability of last week\u2019s market reaction to Thursday\u2019s CPI print.\u00a0We love putting things into context and last week\u2019s rally is very difficult to do so. Thursday\u2019s CPI print spurred one of the biggest 1-day moves in history. If you\u2019ve been a long-term reader, you would […]<\/p>\n","protected":false},"author":11,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","content-type":"","inline_featured_image":false,"footnotes":""},"categories":[20,129],"tags":[53],"class_list":["post-232644","post","type-post","status-publish","format-standard","hentry","category-blog","category-market-updates-blog","tag-cpi"],"yoast_head":"\n\n
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