1330 Orange Ave., Ste 302
Coronado, CA 92118
Read financial tips and market updates in our weekly newsletter
Copyright © 2002 – 2023 Orion Capital Management LLC • Coronado, CA
Disclosure: Orion Capital Management LLC (“Orion”) is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC). The firm offers advisory services in the State of California and in other jurisdictions where registered or exempted. Registration does not imply a certain level of skill or training. The information on Orion’s website or in its distributed commentary shall not be directly or indirectly interpreted as a solicitation of investment advisory services to persons or entities of another jurisdiction unless otherwise permitted by statute. Orion’s individualized responses to consumers in a particular state in the rendering of personalized investment advice for compensation shall not be made without the firm first complying with jurisdiction requirements or pursuant to an applicable state exemption.
The information on Orion’s website or in its distributed commentary is not investment, tax, accounting or legal advice. Orion is not a tax advisor. For tax advice individuals should consult their CPA. This information is also not an offer or a solicitation of an offer to buy or sell any security, or to be construed as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon in the making of investment decisions. All content on this site is for informational purposes only, and nothing herein should be construed as an investment recommendation. Opinions expressed herein are solely those of Orion, unless otherwise specifically cited. Material presented is believed to be from reliable sources, but no representations are made by our firm as to other parties’ informational accuracy or completeness. All information or ideas described on Orion’s website or in its distributed commentary should be discussed in detail with an investor’s personal financial advisors and legal counsel prior to implementation.
Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested.
The information on Orion’s website or in its distributed commentary is provided “AS IS” and without warranties of any kind, either express or implied. To the fullest extent permissible pursuant to applicable laws, Orion Capital Management LLC disclaims all warranties, express or implied, including, but not limited to, implied warranties of merchantability, non-infringement, and suitability for a particular purpose.
Testimonials or reviews on Orion’s website are from current clients. Orion does not compensate for reviews or testimonials and has no material conflicts with clients offering reviews.
Orion does not warrant that the information on Orion’s website or in its distributed commentary will be free from error. Your use of this information is at your sole risk. Under no circumstances shall Orion be liable for any direct, indirect, special or consequential damages that result from the use of, or the inability to use, the information provided on this site, even if Orion or an Orion authorized representative has been advised of the possibility of such damages. Information contained on this site should not be considered a solicitation to buy or an offer to sell any security, or a recommendation to buy or sell any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized.
Schedule a quick introductory call with you and see if we would be a good fit for you.
Inflation Rolling Over?
So far in the fourth quarter, markets have bounced nicely from the drubbing they took from mid-August through September. One key economic number, in our view, was responsible for much of this bounce. On November 9, when the Bureau of Labor Statistics (BLS) reported that inflation rose (only) 7.7% year-over-year during October, markets celebrated by powering both the S&P 500 index and the Dow 30 to their largest single-day percentage gains in two years. While obviously still very high on an absolute basis, October’s 7.7% was not only lower than the 8% that was widely expected, but also a significant step down from September’s 8.2%.
Fed Dampens Expectations
The Fed, of course, was quick to downplay the significance of the October inflation report. It was, after all, just a single number in what can be a pretty choppy data series. The last thing the Fed wants is for everyone to celebrate the vanquishing of inflation—especially if it is not yet vanquished. For inflation to fall all the way down to the Fed’s 2% target, there will likely be plenty of economic pain in the coming quarters.
According to FactSet, a data provider, more than 90% of companies in the S&P 500 Index have reported their earnings for the third quarter. On balance, companies have performed relatively well, having grown their earnings at a mere 2.2% year-over-year, but doing about 2% better than analysts expected, on average. Many are, however, using their earnings conference calls to pour cold water on their growth expectations for next year. Now many analysts are expecting corporate earnings to be flat to slightly down next year. With inflation still likely to remain high through next year amid a weakening consumer segment, flattish corporate earnings in 2023 would seem reasonable.
Geopolitical Risks Remain High
While most investors are focused on when the Fed begins to intimate that is has done enough rate hiking, it bears mentioning that geopolitical risks continue to increase, not recede. The retaking of Kherson by Ukrainian forces was certainly an embarrassment for the Russians, who, at least for the moment, seem unlikely to have the stamina or morale to launch any sort of meaningful counteroffensive. Meanwhile, Russian missiles continue to rain down on Ukrainian infrastructure and random civilian areas. If Putin continues to lose on the ground, as seems likely, he may resort to more desperate measures. Also, something that does not get as much airtime is a potential Chinese invasion of Taiwan, which, with Xi Jinping having just secured a third term as China’s leader, seems increasingly realistic. If this were to happen, and the U.S. got into the fight to defend Taiwan, it would be an economic disruption orders of magnitude more damaging to the global economy than the Russian invasion of Ukraine.
Elections and Crypto Have Little Impact
There have been two other noteworthy events so far in the quarter, the midterm elections and the collapse of cryptocurrency exchange FTX. The midterms often give a boost to markets once they are over if only because they are a source of uncertainty. With the results in, investors can cross any potential risks from them off their lists. In our view, domestic politics do not play a major role in determining the path of markets. Interest rates and the business cycle exert much more influence over stocks and bonds, in our opinion.
The collapse of cryptocurrency exchange FTX has also been in the headlines for the past couple of weeks. Despite the amount of money lost by investors in this debacle, there does not seem to have been much, if any, spillover into the equity markets. Let’s hope it stays that way.
Please contact us if there is anything you would like to discuss about your investments or the markets. You can call us at 619-319-0520, email Peter Thoms, or schedule a call with us below.
*Image: ©Jupiterimages from Photo Images
Join Our list!
Join our email newsletter list to receive more market updates and financial articles like this one.
Markets Not Toeing the Fed’s Line
In the opening weeks of 2023, equity markets here in the U.S. and around the world have performed well, signaling
Can the Fed Stick the Landing?
2023 Investment Outlook In 2022, inflation spiked around the world because of supply chain constraints, massive pandemic-era fiscal stimulus and
2022 Year-End Financial Checklist
2022 has delivered way more than its fair share of uncertainty and stress for investors. Taking stock of your complete
Peter Thoms, CFA, MBA