Hot performance from stocks after cooler than expected inflation data

Market Review from Realm Investment Management – week ending 11th November 2022

In last week’s US Midterm elections, the forecasted “red wave” did not materialise and a surprisingly strong performance from the Democrats saw them retain control of the Senate. They also have a chance that even the House could remain theirs, although that hope looks to be fading today (Monday) with Republicans edging ahead in a tight race. Either way, the outcome mat not be decided for a few days yet.

Last week was also very much about Thursday’s cooler-than-expected US Consumer Price Index (CPI) data. CPI was just 0.2% less than expected and equities responded with a strong rally – the S&P 500 ended the week with its best performance since June. Investors obviously saw much to cheer but some commentators have advised caution saying there remains plenty to be concerned about including the outlook for corporate earnings. It should also be noted that Fed Chairman Jerome Powell reiterated his view that the “historical record cautions strongly against prematurely loosening policy”.

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