The S&P 500 moved down to set a new low last week confirming a near-term downtrend within a larger long-term market reversal. The move was driven by the rising fear of inflation, the FOMC, and earnings power for S&P 500 companies in the face of slowing economic activity. The data is still iffy on the recession front but much of it speaks of peaking within the US economy and peaking could lead to contraction if the Fed acts too hastily.

The biggest risk for the market is inflation. The PCE index not only showed acceleration from the previous month, which was expected, but it came in hotter than expectations and point to another aggressive move by the FOMC. As it is, the market is pricing in a solid chance for another 75 basis point rate hike in early November and a near certainty rates will rise another 150 basis points by the end of the year.