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Home>Daily Capital>Investing & Markets>September Market Recap: Wall Street Slumps with High Inflation

September Market Recap: Wall Street Slumps with High Inflation

Declines in stocks and bonds accelerated in September. The most recent consumer inflation reading delivered an 8.3% headline number for year-over-year price increases in August. While this was only modestly ahead of expectations, the report initiated a spike in market volatility, suggesting a fair number of people had been harboring some confidence that inflation had already peaked and was headed down.

Fed’s Rates & Remarks

Continued market fixation on the Fed leaves us in a period where good news for the economy is bad news for stocks, and vice versa. The Fed raised short rates by 0.75% at their September meeting, with the Fed funds rate now targeted at 3% to 3.25%.  One year Treasury bonds are yielding close to 4%, implying more hikes to come. Probably more important than the actual rate hike was a continued hawkish tone, including Chairman Powell mentioning several times that the battle to contain inflation would require some “pain” to bring it back toward target.

Worried about inflation eating into your savings? Use our free Retirement Planner to model different scenarios based on inflation.

Why Continue Investing?

In a rather bleak global backdrop where it seems almost everyone “knows” things are going to get worse, many are asking why should they invest or stay invested now? In our view, the answer is that staying invested in a diversified strategy, along with periodically rebalancing, provides the best chances for success and helps reduce the odds of debilitating behavioral mistakes.

Every bear market feels awful and scary, but all of them eventually come to an end with a new cycle beginning.

The Impact of Elections

The upcoming elections are proving to be more interesting than previously expected. Republican momentum has slowed and both houses of Congress are now up for grabs. As it relates to asset prices, which political party is in power tends to matter less than most people believe. Divided government can be a constructive backdrop for stocks because it leads to less legislation and therefore less uncertainty. While suspenseful for those who are interested, we don’t expect these midterms to have much impact on markets in the near term.

The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

Craig Birk leads the Personal Capital Advisors Investment Committee and serves as Chief Investment Officer. His focus is translating improvements in technology into better financial lives. Craig has been widely quoted in the Wall Street Journal, Bloomberg, CNN Money, the Washington Post and elsewhere. Prior to Personal Capital Advisors, he was a leader within the portfolio management team at Fisher Investments, helping assets under management grow from $1.5 billion to over $40 billion. Craig graduated from the University of California at San Diego and has earned the Certified Financial Planner® designation.
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