“However, don’t rejoice that the spirits submit to you, but rejoice that your names are written in heaven.”
Luke 10:20 (CSB)
In his Gospel, Luke tells us that Jesus once sent out seventy-two of his followers. Their job was to travel to the towns and villages he was planning to visit and pave the way for him. He even gave them the authority to preach and do marvelous works on his behalf. These short-term "mission trips" proved to be very successful. They reported back to him, enthusiastically regaling him with stories of all that they had done, noting that they were even able to cast out demons in his name. Jesus was just as excited as they were, remarking that he had even "watched Satan fall from heaven like lightning" due to their endeavors. But notice how he refocused their enthusiasm in verse 20. Instead of finding joy in their accomplishments for him, they were to discover it in their relationship with him.
We live in a culture driven by accomplishment. People tend to measure themselves (and each other) by what and how much they do. As Christians, we can fall into this trap as well. Certainly, Ephesians 2:10 tells us that God created us to do good works, and his Spirit equips us with gifts to serve and spread the Gospel. But in this story, we see that Jesus is far more excited about his relationship with us than our perceived usefulness to his mission. He relishes our being in him far more than what we do for him.
Investors interpreted mixed signals from Federal Reserve officials this week, stoking further interest rate volatility in a market on edge over future policy path. Tough talk from Federal Reserve Bank of Minneapolis President Neel Kashkari in the middle of the week sent the terminal federal funds rate to 5% by March of 2023. But on Friday, fed funds futures traded lower by over ten basis points on a report from the Wall Street Journal that some officials were signaling a desire to slow down the path of rate increases. The market has fully priced in a 75-basis point hike for this upcoming week but remains divided on a 50- or 75-basis point hike in December. Equity markets have yet to price in the likely double-digit decline in earnings that would occur in a recession – an event now expected by 98% of U.S. CEOs.
U.S. stocks rose strongly during a volatile week, thanks partly to better-than-expected earnings announcements boosting sentiment. Still, earnings season is just getting underway, and even when all the results are in, potential future weakness in 2023 may not yet be fully appreciated by investors this quarter. This week's action appeared to be another bear market rally, with stocks up 7.5% off the intra-day low hit just last week.
Economic data on growth was mixed but strong enough to keep any Fed pivot at bay for now. Industrial production rose a stronger-than-expected 0.4% in September, while homebuilder sentiment fell to the lowest level in a decade. Labor markets continued to show little slack, as initial jobless claims surprised on the downside at 214K, giving the green light for further rate increases. However, leading economic data point to further weakness and a looming recession, with a -0.4% decline in September.
While just off recent peaks, interest rate volatility and dollar strength remain at levels where historically they've often led to financial crises in markets, a continued risk today for markets battling with questionable liquidity. As long as this continues, it will put downward pressure on risk assets and force foreign central banks to continue hiking rates.
Developed European stocks also rose sharply last week as the market cheered the resignation of U.K. Prime Minister Liz Truss and the scrapping of her fiscal policies. Yields climbed alongside the U.S., with the German 10-year at more than a decade high ahead of expectations this week for another 75-basis point rate hike from the European Central Bank. Also noteworthy, European gas prices slumped 20% on the week as leaders finally came together on measures to rein in prices.
Japan’s stock market traded marginally lower in volatile trading. The Bank of Japan stepped up its interventions in bond markets (holding its 0.25% 10-year peg) and in currency markets to weaken the Yen as it briefly tested 151/dollar, a 32-year low. Meanwhile, Chinese markets fell nearly 3% and remain near year-to-date lows amidst a challenging growth backdrop. Some China insiders believe the country is undoubtedly in a recession due to COVID policies and the housing downturn, although officials are almost sure not to provide a negative GDP print.
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