Financial markets rebounded strongly last week as Thursday’s better-than-expected Consumer Price Index (CPI) report provided investors with some hope that inflation may start to move lower.1 Both bonds and stocks registered near-record-high daily returns on Thursday.2 The decline in CPI — while still well above the 2% target set by the Federal Reserve (Fed) — will likely mean smaller rate hikes ahead and a pause in raising rates in the first half of 2023.
Despite better news for stock and bond markets, cryptocurrencies sold off sharply following the bankruptcy of FTX — a popular cryptocurrency exchange that misused client funds.3 Declining confidence in crypto markets is almost certain to create continued volatility in the asset class.
This week’s economic calendar is highlighted by another critical reading on inflation with Tuesday’s Producer Price Index report.4 The inflation outlook will continue to be the driving force for Fed policy and, ultimately, capital market performance.
1Source: Bloomberg- US Inflation Slows More Than Forecast, Gives Fed Downshift Room; 11/10/22
2Source: CNBC- Dow pops 1,200 points, S&P 500 jumps 5% in biggest rally in two years after light inflation report; 11/10/22
3Source: The New York Times- Embattled Crypto Exchange FTX Files for Bankruptcy; 11/11/22
4Source: MarketWatch- U.S. Economic Calendar; as of 11/14/22
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