So, what will the Fed do at its latest meeting? The short version is that almost everyone thinks it will raise rates by 75 bps (or 3/4 of a percent). Almost, in this case, means that a minority of people think the Fed will raise rates by more, like a full percentage point. The takeaway is that everyone does expect rates to go up—and by an amount that, prior to the past couple of months, would have been shockingly large.

We're excited to roll out a new and improved format for our Monthly Market Risk Update (just like we did with our Economic Risk Factor Update last week). Each month, we will continue to review the biggest market risk factors, but we’ll do so in a SlideShare format we hope you will find both easy to read and informative. Let’s take a closer look.

Yesterday’s inflation print was a big surprise—a bad one. Yet, looking at the headlines, you could be forgiven for wondering why. The headline CPI, after all, increased by only 0.1 percent, after being flat the prior month. If we annualize those two months, the inflation rate would be only 0.6 percent per year, which is the opposite of what everyone is panicking about. It isn’t that simple, of course. But given that and the fact that inflation for the past 12 months was down from 8.5 percent to 8.3 percent, it would seem inflation is slowing. So, why the panic?

We're excited to roll out a new and improved format for our Economic Risk Factor Update. Each month, we will continue to review the biggest risk factors to the economy, but we’ll do so in a SlideShare format we hope you will find both easy to read and informative. Let’s take a closer look.

August was a resumption of the earlier pullback after a surprisingly strong July. The S&P 500 lost 4.08 percent, the Dow Jones Industrial Average (DJIA) dropped 3.72 percent, and the Nasdaq Composite fell 4.53 percent. Markets resumed their downward trend for the year, bouncing, in some cases, off long-term trend lines. Internationally, developed markets fell, although emerging markets eked out a small gain.

After a strong rebound in July, markets pulled back again in August. U.S. and developed international markets ended the month down by 3 percent to 5 percent, and fixed income declined. The primary driver here was rising rates. Higher rates provide for lower stock market values, and with fears of a recession taking down expected earnings, the market had a double whammy. Still, there was good economic news. Job growth beat expectations, and consumer and producer inflation showed signs of peaking.

I have been saying for some time now that, as long as job growth remains strong, a recession simply isn’t likely. So far, that has played out, but the same question comes up every month: will job growth remain strong? We’ll find out on Friday whether that is still the case.

The big question on everyone’s mind is, why is the market going down? The answer, in short, is interest rates. Interest rates are up. When rates go up, stocks tend to go down. And this takes us to the next question: why are interest rates up—and will they continue to rise?

My colleague Sam Millette, manager, fixed income on Commonwealth’s Investment Management and Research team, has helped me put together this month’s Market Risk Update. Thanks for the assist, Sam!

Equity markets rebounded in July after experiencing widespread losses in the second quarter. The S&P 500 gained 9.22 percent during the month, while the Dow Jones Industrial Average increased 6.82 percent. The Nasdaq Composite saw the largest rise, as the technology-heavy index was up 12.39 percent in July. These strong results were encouraging, but they were not enough to offset declines from earlier in the year.

Earlier this week, we saw the Consumer Price Index (CPI) report was down from last month and generally well below expectations—in this case, a good thing. Today, we got the Producer Price Index (PPI) report, which was also down from last month and less than expected. Inflation appears to have peaked and is potentially on track to decline.