Economic Market Summary

Market Down and Dirty

Last Week’s Economic/Market Summary

 Data 

• U.S. equity indices finished the week down as the recent sell-off intensified.
  • S&P 500 -0.16% Dow -0.24%, Russell 2000 -1.28%, Nasdaq -1.54%1 
    • The All-Country World Index lost -1.60%.1 
  • S&P 500 sub-sectors were mixed last week despite all major indices being down. 
    • Energy led with a gain of over 10% while Utilities gained 1.33%.1 
    • Real Estate & Consumer Discretionary led to the downside with losses of 3.8% & 2.9%.1 
  • The CBOE Volatility Index (VIX) declined 9.61% to end at 30.19. 

• US Treasury bond yields skyrocketed higher last week. 
  • US 2yr +0.02% at 2.73%, 10yr +0.23% to 3.12%, 30yr +0.28% to 3.22%.1 
  • The 10yr surged above 3% for the first time since 2018. 1 

• Commodities as an aggregate asset class moved higher last week. 
  • WTI Crude gained 5.49%.1 
  • Gold lost 0.79%.1 
  • The US Dollar index rose by 0.68%.1 

• In our opinion, U.S. economic data was mixed last week. 
  • The labor market remained strong with the latest data releases. 1 
  • US productivity sank at a 7.5% pace in the 1st quarter; the biggest drop in 75 years. 1 
  • The Federal Reserve hiked interested rates by 0.50% which was widely expected. 1 

• An index of equities outside the US (FTSE All-World ex-US) declined 2.28%.1 

Conclusion 

• Major stock indices continued with extreme volatility as Fed policy combating inflation, spiking interest rates, a strengthening dollar, & question marks in China led to another late-week selloff. 
  • Stock initially bounced following the Fed’s rate hike on Wednesday, but fell face-first into the weekend as the risk of runaway inflation seemed to weigh down on investors. 
  • Thursday was only the 4th time in 20 years that the main stock & bond indices both lost 2% at the same time. 1 
  • The S&P 500 posted its 5th straight weekly drop…the longest since June 2011. 1 
    • The S&P is now down 14% in 2022 which has wiped approx. $6 trillion from its value. 1 
  • The tech-heavy Nasdaq led to the downside with a loss of 1.54% bringing its YTD return to -22%.1 
    • 47% of Nasdaq companies are down greater than 50% so far this year. 1 
    • This shows the level of support shown to the Nasdaq & S&P 500 by the mega-caps. 
    • We believe that if the mega’s start to breakdown, the indices could easily explode downward double digits relatively quickly. 

• S&P 500 subsectors were mixed last week. 
  • Energy led to the upside with a gain of over 10% as strong earnings and higher oil prices helped. 1 
    • Utilities were also strong despite rising interest rates. 
  • Real Estate led to the downside on the back of rising interest rates and weakening R/E data. 1 
  • Interesting that Financials finished the week +0.67%.1 
    • Financials traditionally do well in a rising rate environment and yet are down north of 11% year-to-date. 1 

• The US Federal Reserve hiked interest rates 0.50% on Wednesday which was all but priced in based on expectations from market participants in the futures market. 1 
  • Their proposed plan for bringing down the size of their bond holdings seemed well received. 
  • Equity market’s exploded higher during Chairman Powell’s conference when he indicated a 0.75% hike was not on the table at this time. 1 
  • This excitement quickly ended on Thursday as all asset markets sold down hard. 

• The sell-off in US Treasury bonds steepened as the longer maturities saw their rates rise the most. 
  • The spread between the 2yr & 10yr widened by more than 0.17% and reached the steepest level since early March. 1 
  • The 2yr, 10yr, & 30yr are all within striking distance of their 2018 highs which are major technical resistance levels. 1 
    • If these levels do not hold, there could be add’l pressure on equities…especially the growth oriented areas that have been under the most pressure thus far in ’22. 

• Interesting that the Volatility Index (VIX) fell last week by almost 10%.1 
  • Through all the carnage thus far in 2022 in equities, the VIX has failed to break out into what would be considered “complete crash mode”. 

• Many eyes remain on the evolving situation in China as their “zero-covid” policy continues to pressure their currency & economy. 
  • A slew of data releases from the mainland will happen this week and carry significant weight in regards to short-term price movements. 

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

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

 1 Source: Bloomberg – 5/6/2022  

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