Economic Market Summary

Market Down and Dirty

Last Week’s Economic/Market Summary

 Data 

•  U.S. equity indices posted large gains last week on the back of some strong earnings reports.

  • S&P 500 +4.28% Dow +2.97%, Russell 2000 +4.31%, Nasdaq +4.70%1

    • The All-Country World Index moved higher by 3.24%.1 

  • S&P 500 sub-sectors were all higher last week.

    • Energy led the way with a 10% gain followed by a 6% gain from Utilities. 1 

    • Healthcare & Consumer Staples were the only sectors to gain less than 2%.1 

  • The CBOE Volatility Index (VIX) declined 7.38% to end at 21.33. 1 

• US Treasury bond yields moved lower last week across the maturity curve.

  • US 2yr -0.09% at 2.88%, 10yr -0.14% to 2.64%, 30yr -0.02% to 2.92%.1 

  • The benchmark 10yr yield has now declined 0.86% from it’s high of 3.5%.1 

• Commodities as an aggregate asset class were higher last week.

  • WTI Crude gained 3.77%.1 

  • Gold rose 2.21%.1 

  • The US Dollar index declined for the 2nd straight week at -0.85%.1 

• In our opinion, U.S. economic data was mixed last week.

  • Headline inflation rose more than expected in June at +1%.1 

  • Consumer confidence fell for the 3rd straight month. 1 

  • Household spending held up in June with a gain of 1.1%.1 

• An index of equities outside the US (FTSE All-World ex-US) gained 2.89%.1 

Conclusion

• Equity markets soared last week completing the best monthly advance since November of 2020.
  • Strong earnings from Tech & Energy co’s offset concerning reports on inflation and GDP. 
  • Stock gains seemed to snowball after the Federal Reserve raised interest rates 0.75% and suggested the pace of hikes might slow later this year. 1 
  • The nearly 4% jump on Weds/Thurs alone was the biggest 2-day gain on record following Fed tightening/rate hike. 1 
  • While the recent gain is a breath of fresh air, we remind readers that taking a step back, this most recent gain look a lot like the one experience in March. 
• The Federal Reserve hiked interest rates 0.75% on Wednesday, it’s 2nd consecutive hike of that amount. 1
  • US government interest rates moved lower last week as Fed comments suggested a slower pace of tightening.
    • We believe the Treasury market’s 1.6% July gain, its biggest since March 20001, was fueled by weakness in gauges of business activity, housing and consumer confidence. 
  • In our opinion, the biggest takeaway from the Fed meeting last week was their removal of forward guidance on possible future rate hikes.
    • In the post-meeting conference, Chairman Powell repeatedly stated that the Fed intends to be “fully data dependent” in their future policy response to inflation & other economic data. 1 
  • Their next meeting isn’t until September 21st and a lot could happen between now and then as the market is pricing in a different outcome than the Fed on the inflation front.
    • As such, we anticipate ongoing volatility around economic data until then and most likely throughout the rest of the year. 
• S&P 500 subsectors were all higher last week.
  • Energy led by a wide margin with a gain of over 10%.1
    • Record earnings from Energy companies helped the sector. 
  • Utilities were the 2nd best performer with a gain of over 6%1, helped by the direction of interest rates following the Fed meeting. 
  • 5% gains also transpired in Tech, Industrials, & Consumer Discretionary. 1 
• International equities followed domestic indices higher as the US Dollar’s 2nd week of losses undoubtedly helped these shares.
  • A major gauge tracking non-US equities now sits roughly back at its highs of 2018 and late 2019. 1 
  • Eurozone countries continue to wrestle with their energy dependence on Russia. 
  • China’s factory output unexpectedly contracted in July which reversed earlier economic momentum in the mainland. 1 
• Commodities had a solid week as most moved firmly higher.
  • Oil advanced as OPEC+ will meet this week to agree on their collective production levels.
    • Please note that for the 1st time in a year, there is no clear policy for them to “rubber stamp” which could make for an interesting meeting.
  • Gold had its biggest weekly gain since March amid speculation that the Fed will slow hikes. 1 

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

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

 1 Source: Bloomberg – 7/29/2022  

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