All Eyes on the Fed Meeting

Performance for Week Ending 10.28.2022:

The Dow Jones Industrial Average (Dow) finished up 5.72%, the Wilshire 5000 Total Market Index^SM (Wilshire 5000^SM) gained 4.10%, the Standard & Poor’s 500 Index (S&P 500) added 3.95% and the Nasdaq Composite Index (NASDAQ) tacked on 2.24%. Sector breadth was positive with 10 of the11 S&P sector groups closing higher. The Industrials sector (+6.73%) was the best performer followed by Utilities (+6.48%) and Financials (+6.19%). The Communication Services sector (-2.85%) was the sole loser.

*See below for Index Definitions

MARKET OBSERVATIONS: 10/24/22  – 10/28/22

Stocks indices finished the week higher with the S&P 500 now gaining in three of the past four weeks. Since reaching a two-year closing low on October 12, the S&P has rebounded by nearly 9.1%. The recent uptick in the equity markets has been driven by the better than feared kick-off to third quarter earnings season and the possibility the Federal Reserve might pull back on its aggressive rate increases by year-end. On the economic front, the economy rebounded during the third quarter, posting an annualized growth rate of 2.6%, after delivering negative growth during the first two quarters of the year. One area of the economy that continues to suffer is housing. Sales of new homes fell 10.9% in September, as surging mortgage rates pushed would-be buyers out of the market. US mortgage rates topped 7% for the first time in more than two decades, extending a string of steep increases that have stymied housing demand, according to data released last week by the Mortgage Bankers Association.

Q3 Earnings: Despite some high profile earnings misses, overall earnings continue to trend at a better than feared pace. Through Friday, 263 members of the S&P 500 has released third quarter results with nearly 71% beating expectations. With a little over half of the S&P 500 reporting results, aggregate earnings for this group are up 1.8%, but still slightly below the 3.8% forecasted pace for the overall quarter. So far the strongest results have come from Energy, Real Estate, and Consumer Discretionary. At this stage the Materials sector has posted the weakest pace of growth. With over 160 members of the S&P scheduled to release results in the coming week, we are likely to get a better sense of how the overall quarter shapes up.

The Week Ahead: The focal point in the week ahead will be the two day FOMC meeting on Tuesday and Wednesday. Based on Bloomberg’s World Interest Rate Probability tool, the Fed is widely expected to deliver a fourth consecutive 75bp rate increase and hint at a less aggressive stance (i.e. 50 basis points) starting at the next meeting in December. It will be another busy week on the earnings front with 164 members of the S&P 500 scheduled to release results, including 1 member of the Dow Industrial Average amongst this group. On the data front, all eyes will be on Friday’s monthly payroll report. After growing by 263K in September, nonfarm payrolls are expected to expand by another 190K in October, according to Bloomberg. Other economic reports of interest include; September Job Openings, the ISM Manufacturing and Services reports for October, September Factory Orders, and weekly Jobless Claims. Outside of the FOMC meeting there will be just one Fed Head speaking, with Boston Fed President slated to discuss the economy and monetary policy at a virtual event on Friday.

— By Michael Schwager, Chief Market Strategist, Managing Director

Definitions

The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally defined as the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.

Wilshire 5000 Total Market Index^SM represents the broadest index for the U.S. equity market, measuring the performance of all U.S. equity securities with readily available price data. The index is comprised of virtually every stock that: the firm's headquarters are based in the U.S.; the stock is actively traded on a U.S. exchange; the stock has widely available pricing information (this disqualifies bulletin board, or over-the-counter stocks). The index is market cap weighted, meaning that the firms with the highest market value account for a larger portion of the index.

Standard and Poor's 500^© Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.

This material contains opinions of the author, but not necessarily those of Guggenheim Partners, LLC or its subsidiaries. The opinions contained herein are subject to change without notice. Forward looking statements, estimates, and certain information contained herein are based upon proprietary and non-proprietary research and other sources. Information contained herein has been obtained from sources believed to be reliable, but are not assured as to accuracy. Past performance is not indicative of future results. There is neither representation nor warranty as to the current accuracy of, nor liability for, decisions based on such information. No part of this material may be reproduced or referred to in any form, without express written permission of Guggenheim Partners, LLC.