Line chart tracks S&P 500 performance.
Y-axis: S&P 500 Index level; x-axis: 2013 – 2022
Line representing S&P 500 Index shows gains from 2013 to 2015, then flattens until late 2016. S&P gains resumed until 2018. Since 2018 the S&P 500 Index showed gains with some volatility until January 2020. By late March 2020 the index had fallen from just over 3,225 to just under 2,600, but by the end of 2020 it had recovered sharply to over 3,750. As of the end of Q3 2022 it stood near 3,586.
Line chart tracks WTI crude oil prices.
Y-axis: Dollars per barrel; x-axis: 2013-2022.
Oil prices hover around $100 per barrel until mid-2014, when they begin a decline to nearly $48 in early 2015. They then remain roughly in the $40 to $60 range until early 2018, when they rally to over $74. by June. As of year-end 2019, prices were above $61 but by April 2020 they had fallen steeply to just under $19 per barrel. From April to November, prices recovered to just over $45 per barrel, ending the year at over $48. At the end of Q3 2022 they had fallen to nearly $79.
Line chart tracks U.S. Dollar Index.
Y-axis: U.S. Dollar Index level from 75 to 105, x-axis: 2013-2022.
Sharp rise from index level of 81 in July 2014, to more than 98 at the end of Q1 2015. Volatility increases with a high above 102 in late 2016 to a low near 89 in early 2018. From mid-2018 until mid-2019, the index stabilized above 95, rising to above 99 by March 2020, then falling to about 90 by year-end 2020. As of the end of Q3 2022 it was near 112.
Line chart tracks consumer price inflation.
Y-axis: YoY (%), x-axis: 2013 – 2022
Inflation generally hovers between 1% and 2% until late 2014, when it begins a decline to -0.2% in April 2015. Since then inflation has increased fitfully, reaching a peak of 2.9% in July 2018. It then declined to 1.6% as of June 2019 and by late January was 2.5%. From that point inflation fell to near 0% by the end of May 2020. It then rose to 1.2% by late November and to 8.3% by the end of August 2022. Average inflation for the time period shown (2013 through August 2022) was 2.3%.
Sources: Bloomberg and Wells Fargo Investment Institute. Monthly data from January 1, 2013 to September 30, 2022. Consumer price inflation: monthly data from January 1, 2013 to August 31, 2022. The S&P 500 Index is a market capitalization-weighted index composed of 500 widely held common stocks that is generally considered representative of the U.S. stock market. The Consumer Price Index measures the average price of a basket of goods and services. West Texas Intermediate (WTI) is a grade of crude oil used as a benchmark in oil pricing. U.S. Dollar Index (USDX) measures the value of the U.S. dollar relative to the majority of its most significant trading partners. This index is similar to other trade-weighted indexes, which also use the exchange rates from the same major currencies. An index is unmanaged and not available for direct investment. Past performance is no guarantee of future results. Stocks may fluctuate in response to general economic and market conditions, the prospects of individual companies, and industry sectors.
Key Takeaways
- The U.S. stock market fell to new lows in the third quarter as the market digests still elevated inflation, aggressive Federal Reserve monetary policy, and expectations for an economic recession.
- U.S. dollar strength likely will persist for now, pressuring commodity prices lower. However, we believe price declines will be limited by tight supply conditions tied to a commodity super cycle reacting to years of underinvestment.