Market Down and Dirty
Last Week’s Economic/Market Summary
Data
- U.S. equity indices bounced last week to have one of their best weeks since November 2020.
- S&P 500 +5.82% Dow +5.50%, Russell 2000 +5.36%, Nasdaq +8.18%1
- The All-Country World Index soared 5.72%.1
- S&P 500 sub-sectors were all positive with the exception of Energy
- Energy moved lower by 3.86% while still up over 33% on the year. 1
- Consumer Discretionary, Financials & Technology led to the upside. 1
- The CBOE Volatility Index (VIX) sank over 22% to end at 23.85. 1
- S&P 500 +5.82% Dow +5.50%, Russell 2000 +5.36%, Nasdaq +8.18%1
- US Treasury bond market continued its recent decline as yields spiked to 3yr highs.
- US 2yr +0.18% at 1.93%, 10yr +0.15% at 2.15%, 30yr +0.06% to 2.42%.1
- Longer-dated yields rose less than shorter maturities as some yield curves inverted.
- Commodities as an aggregate asset class moved lower last week.
- WTI Crude declined 4%.1
- Gold went down 3.46%.1
- The US Dollar index sank 0.90%.1
- In our opinion, U.S. economic data was mixed last week.
- The Federal Reserve hiked interest rates 0.25% and signaled 6 more in 2022. 1
- Retail sales came in lower than expected in February. 1
- Manufacturing data was mixed with some measures higher and others lower. 1
- An index of equities outside the US (FTSE All-World ex-US) rose 6.65%.1
Conclusion
- US stock markets roared back last week as the major indices ripped off their best week since Nov 2020.
- For only the 4th time in history, the S&P 500 gained at least 1% for 4 consecutive days. 1
- On Friday, over 90% of the stocks in the S&P 500 were trading above their 10-day moving avg. 1
- The Nasdaq led to the upside with a gain of over 8%.1
- S&P 500 subsectors finished the week all higher outside of Energy.
- Consumer Discretionary, Financials & Tech led to the upside. 1
- Growth oriented areas led by a wide margin and Financials were helped by the spike in yields in the bond market.
- Energy followed WTI Crude down last week.
- Interesting that Energy and the broader commodity complex has been tracking the broad Volatility Index in direction. 1
- Consumer Discretionary, Financials & Tech led to the upside. 1
- The US Treasury market saw bond yields spike to their highest levels in 3 years. 1
- The treasury market sell-off showed most dramatically in the 2yr issue which most tracks the Fed as its yield rose to almost 2%.1
- The Federal Reserve raised interest rates 0.25%, which was largely expected. 1
- The surprise was the degree of uncertainty by Fed board members around their expectations for future interest rate levels as seen on their dot-plot.
- The Fed is currently expecting to raise interest rates 6 more times in 2022 while also shrinking their balance sheet by not buying as many bonds on the open market. 1
- The Eurodollar futures curve sees a peak in September of 2023 with a decline from there indicating that being when the Fed will need to loosen policy. 1
- As we’ve stated for some time, the position of the Fed trying to tame inflation while not sinking the US economy into a recession is an extremely difficult situation.
- We remain skeptical that the Fed will be able to get their full hiking program in before having to reverse course to support the US economy from severe recession.
- The surprise was the degree of uncertainty by Fed board members around their expectations for future interest rate levels as seen on their dot-plot.
- China is back in the focus of investors at large as their equity market swung wildly last week as the Chinese Communist Party looked to continue its crackdown of corporations there.
- The following day, the top financial policy committee swung into action vowing to ease the corporate crackdown, support the battered real estate market & stimulate the economy. 1
- We compare this announcement to the one ECB president Mario Draghi made when he said they would do “whatever it takes” to save the euro area economy.
- After this pledge, Chinese equities jumped over 25% in a day for the largest 1 day increase ever. 1
- Even with this spike, it still leaves many Chinese equities down upwards of 50% from their highs a couple of years ago.
- As China battles a Covid spike, tricky relations with the US/Russia/Europe, & their own economic downturn, the direction of their economy’s spillover effects on the entire world will continue to be front and center.
- The following day, the top financial policy committee swung into action vowing to ease the corporate crackdown, support the battered real estate market & stimulate the economy. 1
Ryan A. Mumy, CFP®,
AIF® – Chief Investment Officer
Contact: 828/855-9400
info@CIASonline.com or rmumy@bloomberg.net
1 Source: Bloomberg – 3/18/2022
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