“We hope that in the first quarter of 2023 the peak of inflation will be confirmed, allowing central banks to stop the rise in interest rates and starting the recovery process of the fixed income markets,” says Víctor Matarranz, global head of Santander Wealth Management & Insurance, in the 2023 Market Outlook Report cover letter entitled The Great Interest Rate Adjustment. And he adds that, “from the second half of 2023, we will be able to see the recovery of more cyclical assets such as equities, to the extent that central banks can announce upcoming rate cuts.”
These increases come at a time when investors appreciate that the Federal Reserve will not be as aggressive in its rate hikes as initially expected. Inflation appears to be beginning to give the US economy a break. In October, the CPI marked an increase of 7.7% year-on-year compared to 8.2% in September and the 8% expected by analysts, according to data from the Bureau of Labor Statistics (BLS) of the US Department of Labor. It is the lowest reading since February of this year (7.5%) and the first below 8% since March (7.9%).
In this way, US inflation has chained four consecutive falls in annual terms after marking a ceiling of 9.1% in June. Even with everything, it is still the highest in four decades and the labor market continues to show strength and is close to full employment. In October, 261,000 non-agricultural jobs were created, a figure much higher than the 200,000 that analysts expected and still very high compared to the 180,000 average before the pandemic. The September figure was revised from 263,000 payrolls to 315,000 jobs.
Likewise, the balance of results for the third quarter of the year, in addition, has been generally positive, with exceptions such as Meta (Facebook) or Amazon. According to data collected by Bloomberg, almost 70% of companies have managed to exceed market consensus estimates, beating earnings per share forecasts by almost 3% on average.
At the market level, the aircraft manufacturer Boeing Co has appreciated 21% in the last month and is the main protagonist of the rebound of the DOW JONES Ind Average. It is followed by the pharmaceutical Walgreens Boots with a rise in the last four weeks of 14.5%, Nike -B- is revalued by 14.34%, the investment bank Goldman Sachs by 11.4% and the chemical Dow by 10, 33%. Boeing Co, in fact, is up 42.7% so far this quarter, Walgreens Boots 33%, Nike 27%, Goldman Sachs 31% and Dow 17.4%.
Beneath these rises are also monthly increases for the DIY retailer Home Depot of 9.7%, the construction and mining equipment manufacturer Caterpillar 9.6%, the beauty and drugstore retailer Procter & Gamble 8%, the manufacturer of computer components Intel 7.8%, JPMorgan Chase 7.3%, the manufacturer of consumer products, engineering services and aerospace systems Honeywell International 7.22%, the Walmart supermarket chain 6.58%, the technological Cisco Systems 6.5% and the biochemical Amgen 6.18%.
The oil company Chevron is the big winner of the year in the Dow Jones after revaluing 58.4% and with a somewhat lower annual return, it is followed by the pharmaceutical Merck & Co with 39.5%, Amgen revalues 27.6%, the insurer The Travelers 19.6%, Caterpillar 14.75% and Intel 11.55%.