One Step Forward, or the Fragility of Recoveries

Nick Levinson Comments, Life with Money

As occurred in July through mid-August of this year, stock markets around the world have seen significant gains in October and November 2022. The total US stock market rose about 8% in October and 5% in November. International stocks increased 3% in October and 13% in November. Bond prices have also gone up recently, with gains between 1.5% and 4% for November depending on maturity and credit risk. These bond price increases have accompanied substantial declines in interest rates, with the benchmark 10-year Treasury falling from 4.3% in mid-October to 3.7% at the end of November.
What’s been driving these gains?

As always, many factors come into play, but the most significant appear to be the recent declines, albeit modest, in inflation rates around the world. This has encouraged hopes among investors that the US Federal Reserve and other central banks will begin to moderate recent interest rate increases in their attempts to slow inflation.

The big question is whether these gains will persist and mark the beginning of a recovery from the still-significant declines of 2022. Or will they disappear in the face of higher inflation and/or other factors, as they did over the summer?

As you know, PPA doesn’t make predictions about short-term market price movements. There are simply too many moving pieces that we know about, along with a long list of possible factors that we don’t yet know anything about. That’s why we encourage clients to stick with asset allocations appropriate to their long-term financial situations, making changes as situations change, not in response to markets rising or falling over weeks or months.

As always, PPA advisors are available to consult if you have questions or concerns as we go through these challenging, uncertain times together.