The outlook for S&P 500 (NYSEARCA: SPY) earnings will continue to trend lower, and the downtrend may accelerate.
Traders and investors hoping for good news did not get it from Fed chief Jerome Powell. Mr. Powell, in his prepared remarks to congress, let it be known that inflation is not where the FOMC wants it. The latest data may warrant an increase in the pace of rate hikes and that peak interest rates could be higher than the market is pricing in.
Q4 2022 hedge fund letters, conferences and more
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Before the comments, the CME FedWatch tool was pricing in a 30% chance for another 50 basis point hike and for the peak to be 5.5% or higher. That’s up 50 basis points over the last 2 to 3 months and will move even higher.
“The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” Powell said in prepared remarks for his appearance on Capitol Hill. “If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.”
Higher rates mean 2 things for the market and neither is good. On the one hand, the cost of business will be much higher, and mortgage rates are the best evidence of that.
