September was another volatile month for the markets. Market volatility could last until early October with market returns improving for the remainder of 2022 and over the next 12 months. It's clear that the Federal Reserve's efforts to slow inflation are working. How quickly inflation is back to normal remains the biggest concern for the markets.
Inflation and the Economy
The news on inflation is getting much better. The market expects the forward 12-month inflation rate to be 1.97% (source: Bloomberg). This means the markets are expecting inflation to be back to normal in 12 months. The monthly inflation rates for July, August and September confirm this forecast (source: Cleveland Federal Reserve).
The economy is slowing and that will help reduce inflation. We read many economic forecasts for different points of view and our preferred resource is JP Morgan. We agree with their view that there will not be a recession in 2022 or 2023.
What should I do now?
The markets are very oversold right now. When investor pessimism is historically high it has marked positive turning points in the market. Market history can give us a good idea of what to expect, especially looking out 12 months.
2022 has been a tough year for investors but “this too shall pass”. Right now, the best plan is to stay the course and not make major changes in your investment strategy. If you would like to talk more, please reply to this email or contact our assistant Margie Peter at firstname.lastname@example.org to schedule a time for us to talk.
Thanks, Brad & Monica