Major stock indices ended the volatile week with substantial gains.  It was a busy week for Q3 corporate earnings with companies on average posting small gains.  A weaker dollar may have helped stocks, especially large international companies.  The Japanese yen gained sharply on Friday following action by the Bank of Japan to halt the yen’s slide in value.

Inflation has caused significant increases to inflation indexed items.  This is good news for retirees as Social Security benefits will be increased 8.7% in January.  Medicare premiums, which are adjusted based on expected costs, are actually being lowered 3%.  Also, tax brackets, the standard deduction, and many other dollar thresholds are being raised for 2023 by 7%.  The 401k contribution limit was raised $2000 to $22,500.  With the catchup, people over 50 can contribute $30,000.  The IRA contribution limit will be raised from $6,000 to $6,500.

U.K. Prime Minister, Liz Truss, resigned after only 44 days as her failed attempt to both cut taxes and increase spending created havoc in the bond markets and had to be abandoned.

Treasury bond yields rose sharply with the 30-year bond at 4.344% and the 10-Year note at 4.228%.  30 year mortgage rates rose to 7.38%.  Crude oil declined to $85.13 a barrel and natural gas fell to $5.012 per MMBTUs.  The U.S. dollar index fell to 111.88 and gold rose to $1661.90 an ounce.

• The U.K.’s Office of National Statistics reported that consumer prices were up 10.1% in September from a year ago.
• China’s Bureau of National Statistics cancelled it’s report on quarterly gross domestic product and did not set a new date for its release.  The unprecedented cancellation was likely due to not wanting to spoil the Communist Party’s congress with weak numbers due to the Covid Zero policy.
• Canada reported that inflation slowed in September to 6.9% from a year earlier, the third monthly decline.
  • Gasoline prices fell 7.4% in September but were up 13.2% from a year ago.
• The Treasury Department reported that the deficit in the fiscal year ending in September fell to $1.375TN from $2.776TN in fiscal year 2021. 
  • This came despite an increase of $408BN in education spending in September to pay for President Biden’s student loan forgiveness.
  • While the deficit has fallen in half versus the fiscal year ending in September 2021, it was extremely due to the pandemic and remains at a historically high level.
  • The deficit may get larger over the next year if the U.S. goes into a recession.
• The National Association of Realtors reported that existing home sales fell 1.5% in September for the 8^th monthly decline.  High mortgage rates and low inventory of homes for sale were attributed to the decline.
  • Existing home sales are now down 27% from the peak in January.
  • The median price for an existing home sale was $384,800 an increase of 8.4% from a year ago.
• The Federal Reserve reported that industrial production rose 0.4% in September.  This follows a decline of 0.1% in August.
  • The largest increase was in construction at 1.1%.
  • Manufacturing rose 0.4%.
  • Mining, including oil and gas production rose 0.6%.
  • Utility production fell 0.3% on milder weather.
• The Commerce Department reported that housing starts declined 8.1% in September.  
  • Both single family and multifamily starts fell.
  • Permits, an indication of future housing starts, rose 1.4% but are 3.2% below a year earlier.

• The Labor Department reported seasonally adjusted first time claims for unemployment were 214,000, down from a revised 226,000 in the prior week.
• • • The 4-week moving average of claims, designed to smooth out volatility, was 212,250 up from a revised 211,000.
    • For the full unemployment report go here:  https://www.dol.gov/ui/data.pdf .
• The EIA weekly oil report is here: http://ir.eia.gov/wpsr/wpsrsummary.pdf .  Also, the EIA reported in the prior week:
  • Field production of crude oil rose from 11.9MM BPD to 12.0MM BPD.
  • Natural gas storage rose 111BN cubic feet and is below the 5-year average at this time of year.
• Baker Hughes reported the number of active oil rigs rose 2 to 612.  The number of active natural gas rigs was unchanged at 157.
• Factset reported that with 20% of S&P 500 companies reporting Q3 earnings, the blended earnings growth rate was 1.5%.

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Thank you,

Loren C. Rex, CFP^®, MA                                                                     Erik A Smith, AIF®

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These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. The Indices mentioned are unmanaged and cannot be invested into directly.