Week in Review: September 23, 2022


Week in Review: September 23, 2022

Fed signals more work to do against inflation


Market summary

U.S. equities were lower this week, with the S&P 500 and Nasdaq posting their fifth weekly decline in the past six weeks. All sectors ended the week at least 2% lower, while energy declined the most, off by 9%. The dollar ended the week higher, rising to a 20-year high. Treasuries were sharply weaker with the curve flattening.

This week   

In a unanimous decision, the Federal Open Market Committee (FOMC) increased the Fed Funds rate by 75 basis points for a third consecutive meeting on Wednesday. This brings the Fed Funds rate to 3.00%–3.25%. With inflation significantly above the threshold of the Federal Reserve (the Fed) and stickier than anticipated, the policy statement maintained a hawkish tone — meaning the Fed has more work to do (see Figure 1).

The FOMC’s assessment of current macroeconomic conditions acknowledged the economy has weakened since earlier in the summer; however, the strong labor market buoys the risk of stickier inflation pressures and likely needs to cool for policymakers to achieve their goal. The FOMC’s view on inflation is that it remains elevated and broad due to supply-and-demand imbalances related to the pandemic, higher food and energy prices, and shelter costs.

The Fed reiterated its commitment to fight inflation and continues to prioritize slowing inflation over economic growth. The accompanying Summary of Economic Projections confirms that the Fed intends to act aggressively in its mission to return inflation back to its 2% objective, pushing the policy rate higher than previously expected and keeping it higher for longer. The FOMC’s revised economic projections also acknowledge the toll that higher rates may take on the economy, and their acceptance of that risk, including increased chances of a recession. While markets continue to be wary that future rate hikes will significantly hurt economic growth, the Fed believes this will ultimately lead to longer-run economic sustainability.

We expect the inflationary outlook to remain elevated, pressuring policy rates to move higher and stay at those levels longer. However, the magnitude of future monetary policy actions will be data dependent, causing rate volatility to remain elevated for the foreseeable future.

This week’s housing market data reflects that higher rates have crushed demand as mortgage rates have soared to a 14-year high. This demonstrates the Fed’s work is trickling through, with lower sales and activity dampening home prices. September’s National Association of Home Builders (NAHB) Housing Market Index, a measure of builder confidence and a leading economic indicator, fell further in contraction mode (46) to the lowest level since May 20. The underlying data in the report showed broad-based growth is slowing, with slight declines in current sales, sales expectation and traffic indexes. NAHB’s economists don’t see signs of this downtrend reversing in the near term, due to low homeowner affordability, high mortgage rates, high construction prices and tightening Fed policy. We believe housing will continue to slow and be key to judging the strength of the broader economy in the near term (see Figure 2).

Special update

Recent developments pertaining to Russia’s invasion of Ukraine and President Vladimir Putin’s escalation of force increases the potential for a deeper and/or more contracted conflict. We still feel that the chances of a tail risk event are slight, and the direct exposure of most markets to the region is limited, but we advise investor prudence, as some assets may be more affected by a ratcheting up of tensions than others. Energy, for example, is front and center, with sanctions on Russian products contributing to supply constraints. European equities and companies with exposure to the bloc are more vulnerable to the effects of an energy squeeze, which is likely to weigh on consumption and industrial production. Finally, we’d highlight the implications that this episode has regarding China and the future trajectory of its relations with the global marketplace.

Going Forward

Equity and bond market volatility will remain elevated until the future path of inflation and rates is more certain as markets become comfortable with a “data-dependent” Fed. We expect credit spreads to leak wider to account for recession risks. We remain defensive in our positioning, as we view greater risks to corporate earnings as growth slows, and we’d look for opportunities to upgrade portfolios during market weakness. Within equities, we continue to favor U.S. Large Cap exposure, since economic growth is rapidly slowing in Europe, which is close to a recession, and China’s strict COVID policies have weighed on manufacturing and growth. Within U.S. Large Caps, we favor segments exhibiting a defensive tilt toward low volatility, higher quality and shareholder yield. In fixed income, we remain benchmark duration and higher credit quality in our positioning.



  • August’s durable orders are expected to remain unchanged month over month and will be released on Tuesday. 
  • September’s consumer confidence index is expected to increase to 104 and will be released on Tuesday. 
  • August’s new home sales are expected to decline to 495,000 and will be released on Tuesday. 
  • September’s Michigan Sentiment index is expected to have increased to 60 and will be released on Friday.

Figure 1: Fed Funds futures (percentage)


Sources: Bloomberg, Federal Reserve Bank, First Republic Investment Management, as of September 23, 2022.

Figure 2: NAHB market index vs. 30-year contract rate (percentage)

 NAHB market index vs. 30-year contract rate

Sources: Bloomberg, National Association of Home Builders, Mortgage Bankers Association, First Republic Investment Management, as of September 23, 2022.



Market Returns (USD) as of 9/22/2022





Global Equities

MSCI All Country World

-3.9% -2.5% -22.2% -18.6%

S&P 500

-3.7% -0.3% -20.2% -13.2%

Dow Jones Industrial Average

-2.9% -1.8% -15.9% -10.4%


-4.2% 0.5% -28.9% -25.2%

Russell 2000

-5.6% 1.1% -22.6% -21.4%

First Republic Founders Index

-7.7% 2.9% -30.6% -34.2%

Russell 1000 Equal Weighted

-5.6% -0.6% -16.8% -12.3%


-4.0% -5.6% -24.1% -23.7%

MSCI Emerging Markets

-3.7% -6.9% -23.3% -24.8%

Fixed Income

ICE BofAML Municipals 1-10 Year A-AAA 

-0.9% -1.2% -6.8% -7.0%

Bloomberg Barclays Intermediate Government/Credit

-1.0% -2.5% -9.1% -10.1%

Bloomberg Barclays High Yield Bond

-1.3% 1.7% -12.7% -12.5%

Market Levels


Week Ago

Year End

Year Ago

S&P 500

3757.99 3901.35 4766.18 4395.641

Dow Jones Industrial Average


30076.68 30961.82 36338.3 34258.32

10-Year U.S. Treasury Yield (Constant Maturity)

3.69% 3.45% 1.51% 1.33%

Gold ($/oz)

$1,671.34 $1,665.11 $1,821.90 $1,768.10

Crude Oil ($/barrel)

$83.49 $84.65 $75.21 $72.23

U.S. Dollar / Euro ($/)

0.98 1 1.14 1.17

U.S Dollar / British Pound ($/£)

1.13 1.15 1.35 1.36

Japanese Yen / U.S. Dollar (¥/$)

142.1 143.52 115.16 109.63

Bitcoin Futures ($/XBT)

$19,295.00 $19,852.49 $47,977.03 $43,385.00