Economic Market Summary

Market Down and Dirty

Last Week’s Economic/Market Summary

 Data 

• U.S. equity indices moved firmly lower last week in risk-off trading. 
  • S&P 500 -3.30% Dow -2.47%, Russell 2000 -4.01%, Nasdaq -3.93%1 
    • The Al-Country World Index declined 2.73%.1 
  • S&P 500 sub-sectors all ended the week in negative territory. 
    • There was nowhere to hide as all sectors lost at least 1%.1 
    • Consumer Discretionary led to the downside with a loss of 7.36%.1 
  • The CBOE Volatility Index (VIX) gained 18.33% to close at 33.38. 1

• The US Treasury market was little changed last week. 
  • US 2yr +0.05% at 2.71%, 10yr -0.02% at 2.89%, 30yr flat to 2.94%.1 
  • All eyes are on the Federal Reserve’s meeting this Wednesday.

• Commodities as an aggregate asset class were mixed last week. 
  • WTI Crude gained 1.96%.1 
  • Gold lost 1.83%.1 
  • The US Dollar index rose 1.97%.1

• In our opinion, U.S. economic data was mixed last week. 
  • 1st quarter GDP surprised to the downside at a year over year loss of 1.4%.1 
  • Consumer spending & business investment remained solid in March. 1 
  • Personal savings, consumer confidence, & pending home sales all weakened in April. 1

• An index of equities outside the US (FTSE All-World ex-US) lost 1.97%.1 

Conclusion 

• US stock markets sank across the board last week as earnings from some Tech behemoths disappointed, China increased lockdowns, and the 1st quarter US GDP report showed a broadly weaker than expected economy. 
  • The Nasdaq & small-cap Russell 2000 led to the downside with around 4% losses. 1 
  • The S&P 500 sank 3.3% as April ended up being the broad equity gauge’s worst month since the March 2020 Covid crash. 1 
    • In April, investors yanked $27 billion from the largest ETFs tracking equities. 1

• S&P 500 subsectors finished the week all lower by at least 1%. 
  • Consumer Discretionary led to the downside as Amazon posted a loss and lowered future quarterly guidance. 
    • This was their first loss in over a decade and it caught much of the market off-guard. 
    • In our opinion, the consumer discretionary underperformance YTD has been fitting of the rate of change macro environment as stimulus has faded and inflation has hit purchasing power. 
  • Financials (-4.95%) and Real Estate (-5.61%) were the 2nd & 3rd worst performing sectors. 1 
  • Economic data showing slowing along with pending home sales falling for the 6th straight month could have weighed on these areas of the market. 1

• The US Treasury market was little changed last week as everyone waits on the Fed’s decision on Wednesday. 
  • While the market has pretty much priced in a 0.50% rate hike, their guidance on further reduction of their balance sheet could roil the market further. 
  • The Fed cutting their bond purchases more than expected at the same time that the largest non-US buyer (Japan) has been selling could send yields flying higher. 
    • Japanese investors have sold over $60B worth of US Treasuries recently as the strong US Dollar has made UST’s much higher yields unattractive in their local currency terms. 1 
  • In positive news, the 10yr US Treasury yield has once again become attractive relative to US equity dividends.

• The Chinese Covid response is putting their massive global economic contribution at risk. 
  • Their mass lockdowns are threatening many aspects of the global economy at a time when the US is tightening policy, Chinese economic activity is slowing & their Yuan currency has come under extreme, historic pressure. 
    • The effectiveness of their Sinopharm vaccine is also coming into question. 
  • The scale of losses in the Chinese economy has prompted their officials to step in and assure market that they’ll support the recovery & boost infrastructure spending. 1 
    • These pledges soothed investors’ nerves even though authorities didn’t abandon the stern Covid Zero policy that had sparked the panic in the first place. 
  • The spillover from Chinese uncertainty has spread quickly to other Emerging Markets.

• 55% of S&P companies have reported earnings so far. 1 
  • 80% of companies have beaten earnings expectations & 72% have reported positive revenues. 1 
  • The blended earnings growth rate is just 7.1%…the lowest since Q4 of 2020. 1 

Ryan A. Mumy, CFP®,
AIF® – Chief Investment Officer

Contact: 828/855-9400
info@CIASonline.com or rmumy@bloomberg.net 

 1 Source: Bloomberg – 4/29/2022  

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