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John Hancock: Weekly Market Recap Week Ended October 14th

October 18, 2022

 

 

Yield thresholds breached

For the first time since October 2008, the yield of the U.S. 10-year Treasury bond eclipsed 4.00%. The yield climbed above that level briefly on Thursday in the wake of a monthly inflation report before rebounding to close at 4.01% on Friday. The 2-year Treasury yield also rose, reaching 4.50%—the highest since August 2007.

 

Inflation’s persistence

Despite five interest-rate increases this year from the U.S. Federal Reserve, Thursday’s Consumer Price Index release showed that key drivers of inflation aren’t settling down. September’s annual rate fell to 8.2% from 8.3% the previous month. However, excluding volatile food and gas prices, core inflation rose to a higher-than-expected 6.6%—the biggest jump in four decades.

 

Earnings kickoff

A handful of major U.S. banks kicked off earnings season with mixed results. Entering earnings season, analysts were forecasting that third-quarter earnings for companies in the S&P 500 rose by an average of 2.4%, which would be the lowest earnings growth rate in two years, according to FactSet.

 

Shrinking global expectations

The International Monetary Fund scaled back its global economic growth projection for 2023 to 2.7% and warned about the potential for recessions in many countries if policymakers fail to successfully navigate inflation risks. At the start of this year, the IMF had forecast a 2023 growth rate of 3.8%.

 

Source: https://wmr.jhinvestments.com/

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RISK: There are risks involved with investing, including loss of principal. Current and future portfolio holdings are subject to risks as well. Diversification may not protect against market risk. There is no assurance the goals of the strategies discussed will be met. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from difference in generally accepted accounting in principles or from economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. Bonds and bond funds will decrease in value as interest rates rise. These and other risks are described more fully in the fund’s prospectus. CREDIT RISK: The issuer of a fixed income security may not be able to make interest and principal payments when due. The lower the credit rating of a security, the greater the risk of default on its obligation.

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