US equities finished last week with a negative tone as the heightening geopolitical tension from the Middle East and disappointing corporate earnings dampened investor sentiments.
On Friday, the S&P 500 recorded its eighth daily decline in nine days and was down 2.5 per cent over the week.
The index has now declined by more than 10pc from its peak in July and has entered the "correction" region.
The NASDAQ also suffered from sharp losses as the index lost 2pc following Alphabet's disappointing results and a small recovery of 0.38pc took place on Friday after Amazon, META and Intel Corp reported better than expected earnings.
Overall, the index was 2.62pc lower on the week and down 4.36pc month to date.
On the economic data front, the September US Personal Consumption Expenditures Price Index (PCE) was released last Friday.
The PCE price index for September increased by 0.4pc compared to the previous month, in which September prices for goods increased by 0.2pc and prices for services increased by 0.5pc month on month.
The level of consumer spending increased by 0.7pc month on month in September, which was much higher than the August growth of 0.4pc.
On the other hand, the disposable personal income in September increased by 0.3pc month on month, which was the same as the August growth number.
It is evident from the data that the growth in consumer spending is now much faster than the real income gains, indicating the need for households to draw from their savings to fund their expenditures.
Another interesting piece of data came from the University of Michigan's revised reading of inflation expectations.
The one-year inflation expectation jumped from 3.2pc year on year in September to 4.2pc in October and the five-year inflation expectation also rose from 2.8pc last month to 3pc in October.
Given the strength in expenditure and higher inflation expectations, it is possible that the Fed may remain hawkish and hike in December and or January depending on the upcoming inflation and labour market data.
- This article does not take into account the investment objectives, financial situation or particular needs of any particular person. Before acting on any advice contained in this article, you should assess whether it is appropriate in light of your own financial circumstances or contact your financial adviser. Christopher Hindmarsh is an adviser at JBWere Limited. JBWere Limited AFSL 341162.
