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Week Ending October 22 Financial Markets Update

Stocks ended last week higher after rising four out of five days. The S&P 500 accelerated through Thursday before letting up on Friday to close out the week 1.66% higher. The index has returned over 22% this year despite multiple economic and geopolitical headwinds. Inflation from global supply-chain constraints continues to spook investors as evidenced by the market movement proceeding comments by Federal Reserve Chairman Jerome Powell on Friday. Investors are concerned that higher costs resulting from supply-chain disruptions will lead the Fed to raise interest rates faster than expected. This forward looking view has been offset by strong earnings reports from many companies leading major market indexes to near record highs.

Each spot rate on the U.S. Treasury Curve rose last week as yields marched higher in the face of inflation and the looming Fed taper. The fixed income market’s confidence in transitory inflation is weakening after investors digested an equity earnings week filled with supply chain issues and higher input costs. The 5-Year breakeven rate – a gauge of implied 5-year inflation expectations – surged to its highest level since being introduced in 2002. The index touched 3% on Friday before retreating to 2.90% at week end. On Friday, Fed Chairman Jerome Powell spoke at the Bank for International Settlements conference for the final time before the highly anticipated Fed policy meeting on November 2 & 3 and reaffirmed the Fed’s plan to begin asset purchase tapering this year.

The interpretations and organizations of these ideas are the confidential thoughts of 1st & Main Investment Advisors and do not represent the opinions of BFCFSDifferent types of investments involve varying degrees of risk including market fluctuation and possible loss of principal value. There can be no assurance that any specific investment strategy will be profitable. *some content provided by First Trust Portfolios L.P.  Member SIPC and FINR

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