Economic Market Summary

Market Down and Dirty

Last Week’s Economic/Market Summary

 Data 

• U.S. equity indices ripped higher last week. 
  • S&P 500 +6.62% Dow +5.39%, Russell 2000 +6.00%, Nasdaq +7.49%1 
    • The All-Country World Index rose 4.52%.1 
  • S&P 500 sub-sectors ended the week almost all higher. 
    • Consumer Discretionary, Tech, & Healthcare led to the upside. 
    • Energy was the lone negative sector at -2.59%.1 
  • The CBOE Volatility Index (VIX) declined 12.28% to end at 27.22. 1 

• US Treasury bond yields were lower last week across the curve.
  • US 2yr -0.12% at 3.05%, 10yr -0.11% to 3.13%, 30yr -0.03% to 3.26%.1 
  • While bond yields have stabilized, they remain largely driven by inflation & Fed policy. 

• Commodities as an aggregate asset class were slightly higher last week despite equity weakness.
  • WTI Crude declined 2.32%.1 
  • Gold lost -0.65%.1 
  • The US Dollar index sank 0.56%.1 

• In our opinion, U.S. economic data was mixed last week. 
  • Global PMI’s reflected slowing conditions but still expansionary business conditions. 1 
  • New Orders in the US dropped last month for the 1st time in 2 years. 1 
  • Housing showed mixed data as rates remain elevated with affordability being squeezed. 1 

• An index of equities outside the US (FTSE All-World ex-US) underperformed at +1.85%.1 

Conclusion 

• Equity markets surged back last week as commodities & interest rates both moved lower. 
  • The tech-heavy Nasdaq led domestic markets to the upside last week with a gain of 7.49%.1 
    • This is not surprising as this same index has led to the downside so far in ’22. 
  • The S&P 500 gained 6.62% last week yet remains down over 17% YTD. 1 
    • We believe the sharp drop in commodity prices helped fuel the bounce last week as hopes of an economic “soft landing” were reignited. 

• S&P 500 subsectors were mostly higher last week. 
  • Consumer Discretionary, Healthcare, & Tech led to the upside. 
    • Discretionary & Tech were the biggest decliners coming into last week and are still down 28% & 23% respectively. 1 
  • Energy was the lone decliner last week as crude oil declined. 
    • Crude is now down over 10% in the last 2 weeks. 

• The VIX volatility index declined over 12% last week to end just over 27. 1 
  • This measure of volatility’s movement relative to the S&P 500’s decline has differed tremendously from past stock market drawdowns. 
  • As the S&P 500 has been staging a long, orderly descent from the record level hit at the start of the year as the Federal Reserve pulls back its flood of pandemic-era stimulus, the VIX has yet to truly spike. 
    • We believe the difference is the fact there have been no major shocks like past equity market bear markets. 
  • While volatility could remain muted and even compress further into the end of the quarter, we continue to watch it closely. 

• US government interest rates moved lower across the maturity curve last week. 
  • The shorter maturities that mostly track Fed policy led the declines. 
  • The longer end came down less as market participants continue to measure inflation’s path forward & it’s effect on economic activity. 
  • Federal Reserve Chair Jerome Powell indicated to congress last week that the Fed’s primary focus is inflation right now while acknowledging a recession is possible. 1 

• Commodities sold off very hard last week for the 2nd straight week. 
  • Industrial metals led the decline and are on track for their worst quarter since the 2008 financial crisis. 1 
    • Copper, the great economic bellwether, has plummeted into a bear market from a high 4 months ago. 
  • While inflation is here and supplies are tight, we believe prices are spiraling lower on worries about a major slowdown in industrial activity across major economies. 
  • Will prices reverse higher or will there be enough 

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

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

 1 Source: Bloomberg – 6/24/2022  

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