Financial Market Roundup
Produced by Fifth Third's Investment Management Group

In the following piece, Fifth Third's Investment Management Group recaps the market and how it reacted to various events in the month of October.

CENTRAL BANK
POLICIES

The Federal Open Market Committee (FOMC) meets on November 1-2, where markets are expecting another 75 basis points increase, the fourth 75 basis point increase in a row. The European Central Bank (ECB) met on October 27th and increased rates by 75 basis points, the third policy rate increase in a row. In the subsequent press conference Christine Lagarde, President of the ECB, stated that, “Inflation remains far too high...” and that the ECB’s immediate goals include, “… reducing support for demand and guarding against the risk of a persistent upward shift in inflation expectations.” This sentiment is shared domestically and has market participants expecting further rate hikes over the next several months.

The Bank of Japan (BOJ) continues to maintain its relatively dovish policy stance, holding at a -10 basis point overnight rate with a target of 0.00% for their 10-year yield. Additionally, on October 28th the BOJ announced a slight shift in its bond purchases aimed buying more longer duration bonds.

EQUITY
PERFORMANCE

Global equities rose in October. Domestically, the gain was driven by a strong GDP print on October 27th that showed the economy expanded at 2.6% over Q3 of 2022. Additionally, with the most recent Job Openings Report some investors believe a fed pivot is in sight in 2023. Finally, the start of earnings season has had mixed results, but results have been stronger than market expectations.

Specifically, the S&P 500 Index rose 8.1% in October. The blue-chip Dow Jones Industrial Average increased by 14.1%. The tech heavy NASDAQ Composite was up by 3.9%. International stocks were mixed with the MSCI All Country World Index of developing and developed market stocks up 6.1% in October. The MSCI Emerging Market Index fell by 3.1% in October. The MSCI EAFE Index of developed international equities was up 5.4% in October.

INTEREST RATES
AND GROWTH

On October 27th the Bureau of Economic Analysis released 3Q 2022 GDP figures of 2.6% vs market expectations of 2.4%.

Yields rose in October following elevated inflation prints, higher interest rates and a continued hawkish Federal Reserve stance. The 10-year U.S. Treasury yield rose 22 basis points in October to end the month at 4.05%. Year-to-date the U.S. 10-year Treasury yield has now risen 254 basis points. The spread between the 10-year and 2-year yields remained inverted in October, and narrowed by 2 basis points during the month, continuing to signal an economic slowdown.

Higher rates were paired in the mortgage space as the Freddie Mac 30-year PMMS rose to 7.08% on October 27th, the highest reading in over 20 years.