Economic Market Summary

Market Down and Dirty

Last Week’s Economic/Market Summary

 Data 

• U.S. equity indices ended lowered for the 6th consecutive week. 
  • S&P 500 -2.34% Dow -2.08%, Russell 2000 -2.47%, Nasdaq -2.77%1 
    • The All-Country World Index lost -2.25%.1 
  • S&P 500 sub-sectors were all lower last week with the exception of Staples. 
    • Staples finished the week up 0.30%; Healthcare was the other sector down <1%.1 
    • Real Estate, Tech, Consumer Discretion, & Technology all finished down >3.35%.1 
  • The CBOE Volatility Index (VIX) declined 4% to end at 28.85. 1 

• US Treasury bond yields came down last week across the maturity curve. 
  • US 2yr -0.17% at 2.57%, 10yr -0.18% to 2.94%, 30yr -0.13% to 3.09%.1 
  • The Aggregate Bond market is still down almost 10% in 2022. 1 

• Commodities as an aggregate asset class moved higher last week. 
  • WTI Crude gained 0.33%.1 
  • Gold lost 3.81%.1 
  • The US Dollar index rose 0.78%.1 

• In our opinion, U.S. economic data was mixed last week. 
  • The CPI inflation gauge came in up 8.3% year over year; above estimate, but below last mo. 1 
  • Consumer Sentiment came in at the lowest levels since 2011. 1 
  • Small Business Confidence held in April despite high prices & worker shortages. 1 

• An index of equities outside the US (FTSE All-World ex-US) declined 0.82%.1 

Conclusion 

• Global markets continued their 2022 weakness as a relief rally on Friday couldn’t offset another weekly downturn for major indices. 
  • Slowing global growth & inflation pressures continue to send investors to the sidelines.
    • All major domestic indices were down over 2% on the week. 1 
  • The S&P 500 is now down nearly 20% from its higher with the Nasdaq down almost 25%.1 
  • Of the S&P’s 500 constituents, only 30% have hit a 1 year low as compared to nearly 50% during sell-offs in 2018 and 2008. 1 
    • Despite the bloodshed to the S&P 500, it hasn’t hit the technical “oversold” levels yet as measured by the 14 day relative strength index. 1 
    • Additionally, the S&P 500 is still 14% above its 200-week moving average which has been a level that previously acted as a sort of floor during all major bear markets, except during the tech bubble & global financial crisis which saw deeper declines. 1 

• S&P 500 subsectors were almost all lower last week. 
  • The defensive Consumer Staples area of the market attracted some new fund flows and finished higher on the week. 1 
  • Real Estate led to the downside for the 3rd straight week with a loss of 3.88%.1 
  • Despite the widespread selling in the S&P 500, the Energy sector has held up remarkably well. 
    • It remains up over 45% year-to-date on the back of inflation & supply concerns. 1 

• The US Treasury market saw yields back down significantly last week. 
  • US government bonds have already lost 8.4% this year, putting them on course for their first back-to-back annual declines in at least five decades. 1 
    • A global gauge of fixed income is down 12%. 1 
  • The 10-year Treasury yield has fallen almost 0.30% since hitting 3.20% on May 9, its highest since 2018. 1 
    • As discussed, the 10yr getting to the 3% level attracted serious inflows. 
    • Additionally, in risk-off trading as growth slows, US Treasuries tend to attract capital. 

• The US Dollar was higher once again last week and has now risen 7% in 2022. 1 
  • The Fed’s aggressive series of interest rate hikes & investors seeking the USD as a haven amid economic uncertainty have driven it higher. 
  • As discussed, a rising greenback puts pressure on the global economy as it drives up borrowing costs and stokes financial market volatility. 
  • Additionally, a rising dollar should help the Fed cool prices and support American demand for goods from abroad, but it also threatens to drive up the import prices of foreign economies, further fueling their inflation rates, and sapping them of capital. 

• China’s economy continues to face headwinds of its own. 
  • Their economy contracted in April as Covid outbreaks & lockdowns dragged down their industrial & consumer sectors to the weakest levels since early 2020. 
    • Industrial output fell 2.9% and retail sales plunged 11.1% as the unemployment rate jumped to 6.1%.1 
  • As we’ve discussed at length, the Chinese economy is critical to the globe and any weakness felt their will undoubtably spill over into the broader global economy. 

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

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

 1 Source: Bloomberg – 5/13/2022  

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