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
- S&P 500 -3.30% Dow -2.47%, Russell 2000 -4.01%, Nasdaq -3.93%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
- Consumer Discretionary led to the downside as Amazon posted a loss and lowered future quarterly guidance.
- 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.
- 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.
- 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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