Intelligent Investing: The markets are up! Why?

2022 has been a tough year.

Without a doubt, 2022 has been a tough year for the stock market. In November of 2021, the Fed alerted the markets of it’s plans to begin raising rates to combat inflation. While this is certainly no surprise to many, the market is now trying to figure out when we can get back to normal economic environments.

It is impossible to time the markets as there are too many variables to account for. But a good and simple metric to follow is to evaluate the everyday consumer. Are they spending? Do they have enough in savings? Are they living paycheck to paycheck?

2022 Q3 US bank earnings reports.

Banks can offer good insight into your everyday US consumer. Everyone has a bank account and banks are obviously going to review and monitor their client accounts. Bank of America beat earnings expectation on profit, net interest income and revenue. This came as a mild shock as “the market” is under the assumption that we are in an economic slow down.

Here are some quick insights from Bank of America’s earnings report:

Bank of America’s 3Q net interest margin beat analyst expectations. Net interest margin is a measurement of the difference between the interest banks earn on their assets and the interest they pay out to depositors and other creditors.
The bank’s earnings per share (EPS), profit, and revenue also beat analyst predictions.

A quote from Bank of America’s CEO Brian Moynihan:

Our source from Investopedia:

“Chief Executive Officer Brian Moynihan has said U.S. consumer spending levels and deposit amounts remain strong, even as they showed signs of slowing.”

If this information is true, inflation may not be as huge of a problem as we may believe. While many consumers have experienced an increase in their monthly expenses, they do not seem to be increasing on a month to month basis. As an example, my gas bill is higher than it was last year but it is not as high as it was back in March of this year.

It is possible that the market is taking this information into account. While we still have some work to do economically, investors may be taking this information as a sign that things are not as bad as they seem.

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