{"id":6197,"date":"2022-10-25T13:08:33","date_gmt":"2022-10-25T19:08:33","guid":{"rendered":"https:\/\/www.keystonefinancial.com\/?post_type=oi_article&p=6197"},"modified":"2022-10-25T13:08:34","modified_gmt":"2022-10-25T19:08:34","slug":"market-commentary-october-25-2022","status":"publish","type":"oi_article","link":"https:\/\/www.keystonefinancial.com\/articles\/market-commentary-october-25-2022","title":{"rendered":"Market Commentary | October 25, 2022"},"content":{"rendered":"\n
Markets turned \u2013 again.<\/p>\n\n\n\n
Markets continue to be volatile. Last week, stocks headed north. Nicholas Jasinski of Barron\u2019s reported the change of direction reflected investors\u2019 desire for the market to finally hit bottom. He may be right, but corporate earnings suggest we are not there yet, according to Bob Pisani of CNBC.<\/p>\n\n\n\n
Corporate earnings season is underway. It\u2019s the time when management tells shareholders how their companies performed during the previous quarter. With 20 percent of S&P 500 companies reporting actual results for the three-month period that ended September 30, the blended* earnings growth rate was 1.5 percent. That\u2019s a slower pace of growth than we saw during the previous quarter, but earnings are still growing. The blended net profit margin was 12 percent, which is above the five-year average, reported John Butters of FactSet.<\/p>\n\n\n\n
Yields for United States Treasury bonds rose several times last week, too, although they moved a bit lower on Friday. The yield on a two-year U.S. Treasury note was 4.49 percent at week\u2019s end. In fact, yields for many maturities of U.S. Treasuries were above four percent last week.<\/p>\n\n\n\n
That\u2019s important for investors who need their savings and investments to deliver income. During the past decade, with bond yields hovering at very low rates, some income investors added higher-risk bonds and dividend stocks to their portfolios to meet their income goals. Now, those investors may be able to find the income they need in investments with less risk \u2013 and that could push the stock market lower as investors move money out of stocks and into bonds.<\/p>\n\n\n\n
\u201cStocks are certainly cheaper than they were at the start of the year, when the S&P 500 traded at 21 times forward earnings. It has since seen its multiple contract to less than 16 times [forward earnings]. But relative to bonds, equities are more expensive than at the start of the year,\u201d reported Barron\u2019s. \u201cThe equity-risk premium \u2013 stocks\u2019 earnings yields minus Treasury yields \u2013 is around 3.5% today. It was 4% in January and nearly 7% during the 2007-09 financial crisis,\u201d reported Nicholas Jasinski of Barron\u2019s<\/p>\n\n\n\n
An equity risk premium is the additional return an investor receives for taking on the higher risk of investing in stocks.<\/p>\n\n\n\n
Last week, major U.S. stock indices finished higher.<\/p>\n\n\n\n
*The blended rate combines actual earnings\/profits for companies that have reported with consensus estimates for companies that haven\u2019t yet reported.<\/p>\n\n\n\n