NEW YORK, Oct 1 — Investors believe the feedback loop between US stocks and bonds will likely be a key factor in determining whether the gyrations that have rocked markets this year continue into the last months of 2022.
The S&P 500’s forward price-to-earnings ratio fell from 20 in April to its current level of 16.1, a move that came alongside a 140 basis point surge in the yield on the benchmark US 10-year Treasury, which moves inversely to prices. “We have emphasised... that interest rate volatility has been the main driver of cross-asset volatility. Nevertheless, even we continue to watch the rates volatility complex with incredulity,” analysts at Soc Gen wrote.
Next week’s US employment data will give investors a snapshot of whether the Fed’s rate hikes are starting to dent growth. Investors are also looking to earnings season, which starts in October, as they gauge to what degree a strong dollar and supply chain snafus will affect companies’ profits. At the same time, the fourth quarter is historically the best period for returns for major US stock indexes, with the S&P 500 averaging a 4.2 per cent gain since 1949, according to the Stock Trader’s Almanac.