Economic Market Summary

Market Down and Dirty

Last Week’s Economic/Market Summary

 Data 

  • U.S. equity indices ended lowered for the 7th consecutive week. 
    • S&P 500 -3.01% Dow -2.90%, Russell 2000 -1.12%, Nasdaq -3.82%1 
      • The All-Country World Index lost -1.33%.1 
    • S&P 500 sub-sectors were mostly lower last week as 8/11 finished negative. 
      • Consumer related sectors led to the downside as Staples & Discretionary lost 8%.1 
      • Energy, Healthcare, & Utilities finished the week in positive territory. 1 
    • The CBOE Volatility Index (VIX) finished the week slightly positive. 1 
  • US Treasury bond yields were mixed last week as the yield curve flattened. 
    • US 2yr +0.03% at 2.60%, 10yr -0.16% to 2.78%, 30yr -0.10% to 2.99%.1 
    • The longer maturities moved lower as credit spreads continued to widen. 1 
  • Commodities as an aggregate asset class were little changed last week. 
    • WTI Crude was marginally positive. 1 
    • Gold gained roughly 2%.1 
    • The US Dollar index ended the week lower. 1 
  • In our opinion, U.S. economic data was mixed to down last week. 
    • Consumer spending rose 0.9% in April, yet retailers Target & Walmart shares tanked on slowing. 1 demand, lower margins, and what is looking like excess inventory. 1 
    • Housing data continued to weaken as sales sank to lowest pace since the pandemic began. 1 
  • An index of equities outside the US (FTSE All-World ex-US) outperformed with a gain of 1.28%.1 

Conclusion 

  • Equity markets continued lower last week as recession fears seemed to hit the consumer.
    • The S&P 500 ended the week lower for the 7th consecutive week and briefly touched down 20% on Thursday, which is the technical barrier for a bear market. 1 
    • The NASDAQ is already in bear market territory as it ended last week down 27% in ’22. 1 
      • Going back to the end of 2020, the Nasdaq is down nearly 12%.1 
    • The consumer has been helping to hold up the economy and although consumer spending came in higher than expected for April, actual results from Walmart & Target told a different story. 
      • Shares of Target were down roughly 30% on the week while Walmart sank 20%.1 
  • S&P 500 subsectors were mostly lower last week. 
    • Consumer Staples & Discretionary led to the downside as names like Target & Walmart dragged. 
      • Note that Amazon has also had a rough go at it lately as a result of the same issues. 
        • YTD Amazon is down 36%.1 
    • Energy, Healthcare, & Utilities finished higher last week. 
      • Energy & Healthcare have been 2 of the only sectors that haven’t seen the widespread missing of earnings by core constituents. 
      • Note that Healthcare is typically not exposed to the same cyclical earnings pressure that economic slowdowns have on other sectors. 
  • The US Treasury market saw mixed results. 
    • The short-end, mostly driven by Fed policy, rose slightly while the longer 10yr & 30yr saw yield move lower. 
      • Long maturities seemed to have finally benefited from risk-off trading as the 10 & 30yrs have long been viewed as a “flight to safety” during equity market drawdowns. 
      • We believe any further weakness in equities near-term should see a continued rotation into Treasuries. 
  • The VIX volatility index ended the week mostly unchanged and below 30. 
    • Despite stocks moving lower for many weeks in a row, the “fear gauge” VIX has traded mostly between 25 and 35. 1 
    • Interesting to note that volatility across equities is currently historically cheap relative to the large moves we’re seeing in the stock market. 
    • If volatility were to reprice higher from here, this could be a catalyst for a further move lower in the equity markets. 
  • Being down for 7 straight weeks and realized volatility being where it is, we currently are putting less emphasis on daily/weekly directional moves of 2-3%.1 
    • Erratic moves in both directions in this type of environment are rarely explained by simple headline narratives. 
      • We suggest investors take these with the proverbial “grain of salt”. 
    • As we’ve discussed since last year, the economy & markets are trying to find their footing in this post-Covid stimulus era and there are many unanswered questions persisting. 

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

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

 1 Source: Bloomberg – 5/20/2022  

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