27 October, 2022

Don't Fight The Fed

Wayne Gillespie

In his Q3 update, Wayne Gillespie provides his perspectives on another tough quarter for investors as aggressive central bank interest rate policies continue to weigh on the financial markets.


“Diversification should remain a key part of an investor’s portfolio strategy in today’s markets as returns may come from any one of a variety of sources.”


Here are a few highlights:

  • Accelerating inflation, the war in Europe, and aggressive monetary tightening were major contributors to one of the worst quarters in decades for financial markets.
  • The S&P 500 has dropped more than 20% this year and is now firmly in bear market territory.
  • The U.S. is in the late-cycle expansion phase with moderate recession risk, while Europe faces rising near-term recession risks. China shows signs of emerging from its growth recession amid increased stimulus.
  • Aggressive monetary tightening has triggered broad-based declines in bond prices. Meanwhile, the global economy is slowing, and the path forward for the markets hinges largely on price stability.
  • There are some early positive signs regarding the direction of inflation: commodity prices have turned lower; retailers are cutting prices; freight rates are declining, and Treasury bond yields have declined from their recent peak.
  • While any of these might be early positives for markets, we still expect market volatility to be here for some time.