By Bill Hornbarger, Chief Investment Officer
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Three Things to Watch
- After last week’s strong performance, the markets face a lighter week. From a data perspective, the highest profile event is the University of Michigan survey that includes inflation expectations. Longer-term inflation expectations (5-10 years) have remained at or near 3% in recent months, above the U.S. Federal Reserve’s (Fed’s) stated target. Last month, consumers expected inflation, particularly higher gas prices, to pose greater hardship and a headwind for the economy. The median expected inflation rate a year ahead jumped to 4.2%. Inflation expectations are an important metric for the Fed, and a continuation of these elevated readings will result in tighter monetary policy.
- The Fed’s third-quarter Senior Loan Officer Opinion Survey (SLOOS) will be released this week, and the last SLOOS indicated banks planned to tighten credit in the second half of the year. That, coupled with tighter financial conditions, could be one reason that the Fed’s statement and no move last week was interpreted as relatively dovish. If banks are tightening credit, then one should expect consumption to slow during the fourth quarter.
- The third-quarter earnings season is drawing to a close, with about 400 of the S&P 500 members having reported. Analysts expect earnings growth of 5.7% for S&P 500 companies in the third quarter, with over 81% of the 403 companies in the benchmark index that have reported profits so far having beaten estimates. This was one of the reasons behind last week’s strength and a source of optimism for equity investors. Some of the notable companies scheduled to report next week are Disney, Gilead Sciences and Uber Technologies.
Three Things to Know
- World debt has increased rapidly since 1997 and now stands at approximately $225 trillion, which is a record high level. (Source: @GameofTrades)
- Credit card interest rates have risen to a record high of 21.19% at a time when credit card debt has surpassed $1 trillion. (Source: @GameofTrades)
- “The smartest conference of all time” was held in Belgium in 1927. Albert Einstein took center stage at the Solvay Conference, surrounded by a notable assembly of intellect. Remarkably, 19 out of the 27 participants in this conference would later be honored with Nobel Prizes. This gathering, the fifth in the series of Solvay Conferences, holds a special place in history due to the incredible achievements of its participants and their focus on the emerging field of quantum theory. Notably among the attendees was Marie Curie, who holds the distinction of being the first woman to win a Nobel Prize and the only person to win it twice. (Source: @historyinmemes)
The above information reflects the current opinion of the author. It is based upon sources and data believed to be accurate and reliable. Opinions and forward-looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security mentioned.