2022 | November 7

The Market

Stocks Fall

• Last week, the S&P 500 fell more than 3% and the NASDAQ dropped nearly 6%, failing to maintain their positive momentum from the previous two weeks. The Dow’s relatively modest setback of roughly 1% snapped a four-week winning streak for that index. The S&P closed on Friday at 3,770.6 for a loss of 3.3% on the week.

• Yields of U.S. government bonds rose, reversing course from the previous week’s decline, to mark the 13th week of rising yields out of the past 14. The yield of the 10-year U.S. Treasury climbed to around 4.16% on Friday, up from 4.02% at the end of the previous week.

• As expected, the U.S. Federal Reserve lifted its benchmark interest rate by three-quarters of a percentage point, marking the fourth time in a row it’s approved such a steep increase. Looking ahead to its December meeting, the Fed issued a statement that allowed for flexibility to either approve another three-quarter-point increase or ease back to a half-point hike.

• Despite the risks of a recession, U.S. jobs growth continued to exceed expectations. The government reported on Friday that the economy generated 261,000 new jobs in October, above forecasts for around 200,000. In addition, a separate monthly report issued on Tuesday showed that job openings rose to 10.7 million—also above expectations.

• Without the energy sector’s surging growth, companies across the S&P 500 would be reporting a year-over-year decline in profits of around 5% this earnings season, according to FactSet. However, factoring in the 139% jump in energy earnings, third-quarter net income across the index was expected to rise around 2%, based on the 85% of companies that had reported results as of Friday and forecasts for firms that haven’t yet released results.

• The annual inflation rate in the eurozone climbed to 10.7% in October, up from 9.9% the previous month. Energy costs jumped 41.9% over the same period a year ago and remain a big concern across the 19 Eurozone countries heading into winter. 

• A Consumer Price Index report scheduled to be released on Thursday will show whether inflation remained at an elevated level in October, despite six interest-rate increases so far this year from the U.S. Federal Reserve. In September, inflation slipped to an annual 8.2% rate from 8.3% the previous month, although core inflation excluding food and fuel prices rose to a higher-than-expected 6.6%.

Source: John Hancock Investment Management

Midterm Elections and the S&P 500

Baseball Players Are Superstitious and So Are Investors

The sport of baseball is steeped in superstition. Many players, managers and announcers follow routines and unspoken rules. For example, some say that mentioning the possibility of a no-hitter while it is in progress can jinx the outcome.

In 2020, ESPN’s Tim Kurkjian reported on the routines of retired pitcher Edward Mujica. “He always has to be in the same spot of the bullpen with two outs in the fourth inning of every game. Then, in the fifth inning, he always digs a hole at the front end of the bullpen mound. Then he spits a half cup of red Gatorade into the hole…”

Mujica is not alone. It was rumored that outfielder Torii Hunter cleaned his spikes at exactly 6:40 p.m. before every 7:05 p.m. game, reliever Sean Burnett had a poker chip in his pocket whenever he pitched, and infielder Ryan Zimmerman always used the same shower stall.

Throughout this year’s World Series, we’ve been hearing about another superstition: When the Philadelphia Phillies win the World Series, the U.S. economy tends to slide into recession or the market falls. The Phillies lost over the weekend, and the Astros took home the pennant. Before you breathe a sigh of relief, thinking the Phillies loss will spare the economy and stock markets, check out the data.

From 20,000 feet, the data made for some great clickbait headlines, but when you look closer the facts don’t support the supposition. The Phillies won titles in 1929, 1980 and 2008.

• In 1929, the World Series game was played in early October. The recession had begun two months before, in August 1929. That’s when the stock market began to decline, too.

• In 1980, the World Series was played in mid-October. The recession had begun in January 1980, and the stock market decline started in February.

• In 2008, the World Series was played in late October. The recession had begun the previous year, in December. The stock market decline also began in 2007.

Then, of course, there is the fact that there have been many recessions and market downturns during years the Phillies weren’t in the World Series. It looks like this superstition will have to be benched alongside the Hemline Indicator (the stock market rises and falls with the women’s hemlines), the Pigskin Predictor (when an original NFL team wins the Super Bowl, stocks go up), and the Triple Crown Corollary (when one horse wins the Triple Crown, the Dow drops).