Fairview HK: The Dow Jones Industrial Average fell more than a thousand points

Market players have been anticipating what Federal Reserve Chair Jerome Powell would say at the central bank's annual symposium in Jackson Hole for weeks.
CENTRAL, Hong Kong - Oct. 3, 2022 - PRLog -- They were apparently dismayed by what they heard, as Powell reiterated the Fed's intention to raise interest rates as high as necessary to ensure that inflationary forces do not become firmly entrenched in the U.S. economy. Those hoping for a more dovish answer were disappointed, as the ^DJI finished the day down more than a thousand points. The S&P 500 (^GSPC) and NASDAQ Composite (^IXIC) percentage decreases were likewise in the 3% to 4% range.

There were just a few winners among large-cap firms, as most share values fell along with the overall market. Some now fear that the market's rebound from mid-June to about a week ago was merely a bear market rally, with today's downward move re-establishing a bearish trend that could take market indexes much lower.

Short-term price changes in the stock market cannot be predicted. However, if effective, measures to combat inflation should produce better long-term benefits for investors than if the Fed just backed off and allowed rising price trends to become a permanent part of the US economy.

The main concern for investors now is whether inflation has peaked. Many observers of economic statistics were relieved to see recent moderated increases in the Consumer Price Index (CPI) and the Personal Consumption Expenditures Price Index (PCE). However, just because inflation has slowed down, does not imply it is under control.

The most recent Bureau of Economic Analysis PCE figures explain the whole picture. The headline figure that received the most attention was that the price index declined 0.1% in July, with goods prices down 0.4%.

On the other hand, looking more closely at what goes into the PCE price index provides a more comprehensive picture. A 7.7% dip in the sub-index for gasoline and other energy commodities contributed significantly to the index's decline.

Perhaps most crucially, even bigger drops in a single month would not be enough to reverse negative patterns. Energy prices are more than 45% higher than this time last year. Food and drinks are up over 12% year over year and even after food and energy are excluded, core PCE prices have risen 4.6% since July 2021 which is more than above the Fed's 2% objective.

Fairview HK Limited is one of the foremost privately owned Asia-Pacific orientated, boutique wealth management firms in Hong Kong. We offer our services to a selected group of families, family offices, institutions and fund managers, you may visit our website https://fairviewhk.com/ or contact us via email.

Alannis Meng
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