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Markets & Economic Update for September 2022: As Economy Slows, Has Inflation Peaked?

September 9, 2022
David Lundgren, CFA®
David Lundgren, CFA®

Each month, senior leaders of Hancock Whitney's Asset Management team discuss the latest news and events that impact markets and the economy.

This month: There were new signs of peaking inflation, and August is shaping up to be a second consecutive month of zero/low inflation, which will likely pull Q/Q and Y/Y trends steeply lower. Other economic data pointed to continuing economic weakness in Q322, indicating the economic disruption the Fed is promoting to restrain inflation is under way.


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Key Takeaways:

  • Bond prices plunged during the month as interest rates around the globe rebounded sharply higher during August. The August bond market slump was the third worst monthly decline of 2022 at -2.8% as measured by the broad Bloomberg U.S. Aggregate Bond Index.
  • The Federal Reserve’s annual conference in Jackson, WY was held on August 25-27. Chairman Powell’s statement indicated that rates will continue to rise even though there are early signs of decelerating inflation, and are likely to stay high until inflation has clearly descended back to the Fed’s 2% target range.
  • A volatile August ended with a resumption of the 2022 bear market for stocks. A positive August start was driven by hope that the Fed would be toning down its inflation fight in the face of a looming economic slowdown. However, sensing that that hope was misplaced, stocks resumed the slide begun around the turn of the year.
  • President Joe Biden signed the Inflation Reduction Act of 2022, a major taxation, spending and deficit reduction bill that advances at least some of his priorities around clean energy and climate change as well as health care affordability.
  • Looking ahead to the midterm elections, the outlook for Democrats, which had been bleak, has grown somewhat rosier in recent weeks. Many political analysts have recently flipped from favoring Republicans to control the next Senate to favoring Democrats to retain control with sentiment continuing to trend positive for Democrats. Most analysts and polls still heavily favor the GOP to gain control of the House, though the margins have declined very slightly.


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