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Markets & Economic Update for October 2022: Inflation Persists as Recession Fears Loom

October 7, 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: The Federal Reserve continues to promote economic disruption in order to restrain persistent inflation, and the conflict in Ukraine grinds on.


Watch and listen to the webinar:


Key Takeaways:

  • Economic data pointed to continuing economic weakness in 3Q22, indicating the economic disruption the Fed is promoting to restrain inflation is well under way. After two consecutive quarters of contraction for Real GDP, 3Q projections indicate modest growth (1%) for the quarter. While inflation data has improved marginally, the pace of decline is not sufficient to warrant a pivot from the Fed. However, TIPs spreads indicate a significant decline for near term inflation expectations.
  • Bond prices plunged during the month as interest rates around the globe rebounded sharply higher during September. The September bond market slump was the worst monthly decline of 2022 at -4.8% as measured by the broad Bloomberg U.S. Aggregate Bond Index.
  • The Federal Reserve met on September 21 and increased rates by 0.75% for an unprecedented third consecutive time. Markets are projecting another 0.75% hike in November. Fed Chairman Powell went to great lengths in his post meeting press conference to point out there would likely be economic pain required to snuff out stubborn inflation. Powell noted the chances of a soft landing were fading.
  • Equity markets across the globe sold off in September with major market indices down 9-12%. The S&P 500 declined by more than 9% for the month which is the worst month for the index since March 2020. Markets are retreating because the near-term future is clouded with recession worries and fears of a policy error by the Fed.
  • Ukraine counteroffensives have decimated Russian troops and re-captured several thousand square miles from Russian troops recently. In response, Russian Federation President Vladimir Putin announced a renewed mobilization effort to support the so-called “special operation” in Ukraine, including enhanced weapons manufacturing efforts and conscription of Russian citizens.
  • Putin delivered a speech as part of the ceremony formally announcing the annexation of four occupied regions of Ukraine. It was a well-choreographed, nationalistic show with the Russian-installed leaders of the four oblasts in question present and supportive. Putin’s speech stepped up the saber-rattling, saying Russia would defend its sovereign territory using any means at its disposal.


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