Market Insight October 17, 2022

This week we provide insight on stock performance as of late and what sector is outperforming in the United States.

Stocks Moved Lower on Inflation Data

What is it? 

The data that is used to measure inflation came in higher than expected. In early trading last Thursday, markets pushed lower initially on the news.*

“The Bureau of Labor Statistics released its Consumer Price Index (CPI) for September early Thursday, which showed prices rose 8.2% over the prior year and 0.4% over the prior month. The core consumer price index, which excludes food and energy, rose 6.6% from a year ago, marking the highest level since 1982. Economists surveyed by Bloomberg had expected a slight deceleration to 8.1% annually and the core reading to accelerate to 6.5% from a year earlier.”

Why does it matter?

This inflation data makes it more likely that the Fed will continue to raise rates around 75 basis points (0.75%). Markets have fallen to new lows for the year in October. Some investors were ready to call a market bottom earlier. We bought in sparingly while maintaining larger positions in cash and short term treasury ETFs. After that, we reduced exposure to the overall market on Wednesday of last week. 

Energy is Outperforming Year-To-Date

What is it? 

While the stock market is down so far this year, that is not true for each sector of the U.S. economy. 

**

The above bar chart from FinViz shows the year to date performance of Each of the 11 U.S. sectors as of mid-day on Thursday October 13th. 

Why does it matter?

First this is a good time to point out that holding a security with all the sectors may not be the most favorable allocation. Most of our portfolio models have a tactical approach that allows for more active trading. Our Tactical Equity model for example includes ETFs of each of the 11 sectors. We invest in the ones that fit our investment methodology. For that we take into account what part of the economic cycle we are in, and use charts (among other things) to spot times of growth, contraction, or consolidation. 

We will see if the outperformance in energy holds up. Many conditions could factor in especially how the Fed acts to combat inflation or rising tensions overseas. Inflation may continue, or even turn to deflation which would cause commodity prices such as oil to be worth less compared to the U.S. dollar. While the future is uncertain, we believe that we have a plan in place to navigate the market environment presented to us in the best interest of our clients. 

Other articles we found interesting this week:

Wall Street’s ‘fear gauge’ is flashing a warning that stocks could be about to fall off a cliff

Wall Street ends up 2% after sharp reversal; technicals help

ARK Extends An Open Letter To The Fed

Current 401(k) portfolio

Our last portfolio reallocation: 5/19/2022. 

Want more information?

The weekly market insight provides a window into the process we use in our investment management process. At Breakaway, we believe markets are always changing and require a nimble yet data-oriented approach. 

Our process attempts to identify trends and momentum in the financial markets. With that information, we align our clients’ portfolio accordingly in the hope to help our clients accomplish their life goals while attempting to lower the risk of a large drop in their portfolio.

Click here for more details about our investment management 

Sources:

*Dani Romero. “Stocks sink as inflation report comes in hotter than expected” 10/13/2022. Yahoo Finance. https://finance.yahoo.com/news/stock-market-news-live-updates-october-13-112745635.html

**FinViz. “Year To Date Relative Performance” Financial Visualizations. 10/13/2022. https://finviz.com/groups.ashx

IMPORTANT DISCLOSURES: 

Educational use Only. The market update published by Breakaway Financial Group LLC (“Breakaway”) is intended to be educational in nature and is not intended to be a recommendation for any specific investment product, strategy, plan feature or other purposes. Accordingly, it should not be construed by any consumer and/or prospective client as solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation. 

Advertising and Marketing. Communications such as this are not impartial and are provided in connection with advertising and marketing. This material is not suggesting a specific course of action or any action at all. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, insurance, legal or tax professional that takes into account all of the particular facts and circumstances of an investor’s own situation. No person associated with Breakaway is a licensed attorney or tax professional and the information contained herein should not be considered tax or legal advice. 

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Important Information regarding Registration Breakaway Financial Group, LLC and/or Patrick Traverse offer investment advisory and financial planning services through Belpointe Asset Management, LLC, (“Belpointe”) 500 Damonte Ranch, Parkway Building 700, Unit 700, Reno, NV 89521, an investment adviser registered with the Securities and Exchange Commission (“SEC”). Registration with the SEC should not be construed to imply that the SEC has approved or endorsed qualifications or the services Belpointe offers, or that its personnel possess a particular level of skill, expertise or training. It is important to read disclosures pertaining to Belpointe Asset Management at this link https://belpointeasset.com/disclosure/.  Additional information about Belpointe and Patrick Traverse is available on the SEC’s website at www.adviserinfo.sec.gov.

Craig Stahlecker

Craig Stahlecker

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IMPORTANT DISCLOSURES:
The information provided is intended to be educational in nature and is not intended to be a recommendation for any specific business or tax strategy, plan feature or other purposes. Accordingly, it should not be construed by any consumer and/or prospective client as solicitation of services.

Communications such as this are not impartial and are provided in connection with advertising and marketing. This material is not suggesting a specific course of action or any action at all. Prior to making any business or tax planning decisions, an individual should seek individualized advice from a personal financial, tax, legal, or business consultant professional that takes into account all of the particular facts and circumstances of an individual’s own situation. No person associated with Breakaway Financial Group LLC is a licensed attorney, and the information contained herein should not be considered legal advice.