The NEI team examines what drove markets through October, including the possibility of a slower tightening by the Fed, weaker growth projections, and market reactions to Q3 earnings.
Central Banks decelerating rate hikes, but may take longer to get to peak
Central banks have front loaded their tightening cycles with oversized rate hikes throughout the year, but that could change as policy leaders may take a more cautious approach going forward as they analyze how higher rates are impacting different parts of the economy. A slower pace of tightening may result in a longer journey to peak rates.
Economic growth weakens as monetary tightening takes effect
The lagging impact of monetary tightening is starting to show up as Manufacturing PMI is contracting and GDP growth projections weaken in the year ahead. On the other hand it appears inflation may finally be moderating according to recent data on input prices, supply chains and food prices.
No patience for earnings misses
US equities have been buoyed by a relatively benign earning season given low expectations. However, companies that missed earnings—including mega-caps like Alphabet, Amazon and Google—have seen significant drops in share price as investors expect slower earnings growth in Q4.